Overcoming Informational Barriers to International Resource Allocation: Prices and Ties
AbstractIncomplete information creates matching friction that interferes with the ability of prices to allocate scarce resources across countries but can be overcome by international information--sharing networks. When the difference between country factor--endowment ratios is large relative to network ties, efficient arbitrage breaks down, the price (wage) of each country"s immobile resource becomes partially insulated from changes in foreign supply, and trade liberalisation causes less resource price convergence. The model is applied to the trade and wages debate, to whether ties can reduce world welfare through trade diversion, and to the effect of ties on trade in differentiated versus homogeneous products. Copyright Royal Economic Society 2003.
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 113 (2003)
Issue (Month): 484 (January)
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Other versions of this item:
- Rauch, J E & Casella, Alessandra, 2001. "Overcoming Informational Barriers to International Resource Allocation: Prices and Ties," University of California at San Diego, Economics Working Paper Series qt2k8626fr, Department of Economics, UC San Diego.
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