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Endogenous trading bloc formation in a North-South global economy

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Author Info
Satya P. Das
Subhadip Ghosh

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Abstract

The majority of the trading blocs to date are between similar countries, rather than between developed and developing countries. This paper provides a rationale for why trading blocs among similar countries may arise as an equilibrium phenomenon. It develops a model of an asymmetric world economy in which there are at least four countries. The countries are differentiated with respect to their market size and they choose their trading partners. In the coalition-proof Nash equilibrium, either there is global free trade or free trade areas are formed among similar countries.

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File URL: http://economics.ca/cgi/xms?jab=v39n3/CJEv39n3p0809.pdf
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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 39 (2006)
Issue (Month): 3 (August)
Pages: 809-830
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Handle: RePEc:cje:issued:v:39:y:2006:i:3:p:809-830

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Find related papers by JEL classification:
F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F15 - International Economics - - Trade - - - Economic Integration

Cited by:
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  1. Leopoldo Yanes, 2008. "R&D, Market Structure and Trade: A General Equilibrium Analysis," Discussion Papers Series 361, School of Economics, University of Queensland, Australia. [Downloadable!]
  2. Libman, Alexander, 2009. "Russian federalism and post-Soviet integration: Divergence of development paths," MPRA Paper 12944, University Library of Munich, Germany. [Downloadable!]
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This page was last updated on 2009-10-28.

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