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Trade liberalization and welfare: Differentiated-good versus homogeneous-good markets

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  • Takatsuka, Hajime
  • Zeng, Dao-Zhi

Abstract

In this paper, we examine the effects of liberalization on industrial location and national welfare in a framework of new economic geography. Specifically, we explicitly incorporate arbitrary trade costs in both differentiated-good and homogeneous-good sectors into a two-country model, and clarify the effects of trade-barrier reduction in each sector. We show that their impacts on welfare levels in the two countries are different, and, if an industry is liberalized while the other is protected, a conflict between the countries might occur. Therefore, appropriate liberalization in both sectors is effective to alleviate such a conflict.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 26 (2012)
Issue (Month): 3 ()
Pages: 308-325

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Handle: RePEc:eee:jjieco:v:26:y:2012:i:3:p:308-325

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Web page: http://www.elsevier.com/locate/inca/622903

Related research

Keywords: Trade costs; Firm location; Home market effect; Trade liberalization; Welfare;

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References

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Cited by:
  1. TAKATSUKA Hajime & Dao-Zhi ZENG & Laixun ZHAO, 2013. "Resource-based Regions, the Dutch Disease and City Development," Discussion papers 13001, Research Institute of Economy, Trade and Industry (RIETI).

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