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Bilateral trade between India and Bangladesh: A general equilibrium approach

Author

Listed:
  • Chandrima Sikdar
  • Thijs Ten Raa
  • Pierre Mohnen
  • Debesh Chakraborty

Abstract

India and Bangladesh have pursued policies of trade liberalization since the early 1990s. However, owing to the differential speeds of opening up, Bangladesh's bilateral trade deficit with India widened substantially over the years. This aggravated the economic and the political tensions between the economies. It has been held that promotion of free trade between the two economies may enhance the trade and hence economic cooperation between them. Against this backdrop the present paper proposes a theoretical framework that provides a general equilibrium determination of the commodity pattern of trade and hence locates the comparative advantages of the economies. The empirical implementation of the model considers trade in 25 sectors comparable in the input-output tables of the economies. The study isolates the gains from free trade accruing to either economy. The paper also explores the pattern of bilateral trade when each economy produces goods by utilizing their own as well as the other country's technology. The gains from this trading arrangement are also isolated.

Suggested Citation

  • Chandrima Sikdar & Thijs Ten Raa & Pierre Mohnen & Debesh Chakraborty, 2006. "Bilateral trade between India and Bangladesh: A general equilibrium approach," Economic Systems Research, Taylor & Francis Journals, vol. 18(3), pages 257-279.
    • Handle: RePEc:taf:ecsysr:v:18:y:2006:i:3:p:257-279
    DOI: 10.1080/09535310600844250
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    References listed on IDEAS

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    1. Davis, Donald R. & David E. Weinstein & Scott C. Bradford & Kazushige Shimpo, 1997. "Using International and Japanese Regional Data to Determine When the Factor Abundance Theory of Trade Works," American Economic Review, American Economic Association, vol. 87(3), pages 421-446, June.
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    3. Helpman, Elhanan, 1984. "The Factor Content of Foreign Trade," Economic Journal, Royal Economic Society, vol. 94(373), pages 84-94, March.
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    Cited by:

    1. Tarancon, Miguel Angel & Del Río, Pablo, 2012. "Assessing energy-related CO2 emissions with sensitivity analysis and input-output techniques," Energy, Elsevier, vol. 37(1), pages 161-170.

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    More about this item

    Keywords

    General equilibrium; comparative advantage; free trade; India-Bangladesh;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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