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Understanding the Welfare Implications of Preferential Trade Agreements

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Author Info
Kose, M Ayhan
Riezman, Raymond

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Abstract

This paper examines various implications of preferential trade agreements, namely customs unions and free trade areas, in the context of a multicountry general equilibrium model. The model is calibrated to represent countries with symmetric endowments, and aggregate and disaggregate welfare change measures are used to quantify the welfare effects of preferential trade agreements. It is found that free trade areas are better than customs unions on welfare grounds for the world as a whole. Welfare decompositions suggest that a significant fraction of the welfare changes is explained by the volume-of-trade effect for both types of preferential trade agreements. Copyright 2000 by Blackwell Publishing Ltd.

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Article provided by Blackwell Publishing in its journal Review of International Economics.

Volume (Year): 8 (2000)
Issue (Month): 4 (November)
Pages: 619-33
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Handle: RePEc:bla:reviec:v:8:y:2000:i:4:p:619-33

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  1. Burfisher, Mary E. & Robinson, Sherman & Thierfelder, Karen, 2004. "Regionalism," MTID discussion papers 65, International Food Policy Research Institute (IFPRI). [Downloadable!]
  2. Howard J. Wall, 2002. "Has Japan been left out in the cold by regional integration?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 25-36. [Downloadable!]
    Other versions:
  3. Kose, M. Ayhan & Riezman, Raymond, 2000. "Small Countries and Preferential Trade Agreements "How Severe is the Innocent Bystander Problem?"," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  4. T. Huw Edwards & John Whalley, 2002. "Short and Long Run Decompositions of OECD Wage Inequality Changes," NBER Working Papers 9265, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Conconi, P., 2000. "Trade Bloc Formation Under Imperfect Competition," The Warwick Economics Research Paper Series (TWERPS) 571, University of Warwick, Department of Economics. [Downloadable!]
  6. M. Ayhan Kose & Guy Meredith & Christopher M. Towe, 2004. "How Has NAFTA Affected the Mexican Economy? Review and Evidence," IMF Working Papers 04/59, International Monetary Fund. [Downloadable!]
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