Preferential trade agreements harm third countries
AbstractIn this paper, we study market liberalization in an imperfectly competitive environment in the presence of price effects. For this purpose, we build a three-country model of international trade under monopolistic competition with endogenous prices and wages. The neighboring effect translates how the size effect propagates across countries. When some country increases in size, its relative wage increases, as well as that in a small and near country, while that in a large and distant country falls. We also show that a preferential trade agreement increases the relative wage, the welfare, and the terms-of-trade in the partner countries, where the integration effect dominates, while it lowers those in the third country.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2012035.
Date of creation: 14 Sep 2012
Date of revision:
Contact details of provider:
Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
More information through EDIRC
monopolistic competition; market size effect; preferential trade agreement;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F15 - International Economics - - Trade - - - Economic Integration
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maggi, G & Rodriguez-Clare, A, 1996.
"The Value of Trade Agreements in the Presence of Political Pressures,"
180, Princeton, Woodrow Wilson School - Public and International Affairs.
- Giovanni Maggi & Andres Rodriguez-Clare, 1998. "The Value of Trade Agreements in the Presence of Political Pressures," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 574-601, June.
- Fleurbaey,Marc & Maniquet,François, 2011.
"A Theory of Fairness and Social Welfare,"
Cambridge University Press, number 9780521887427.
- Davis, D.R., 1997.
"The Home Market, Trade, and Industrial Structure,"
597, Harvard - Institute for International Development.
- Donald R. Davis, 1997. "The Home Market, Trade, and Industrial Structure," NBER Working Papers 6076, National Bureau of Economic Research, Inc.
- Donald R. Davis, 1997. "The Home Market, Trade and Industrial Structure," Harvard Institute of Economic Research Working Papers 1800, Harvard - Institute of Economic Research.
- Donald R. Davis, 1997. "The home market, trade, and industrial structure," Staff Reports 35, Federal Reserve Bank of New York.
- Diego Puga & Anthony J. Venables, 1995.
"Preferential Trading Arrangements and Industrial Location,"
CEP Discussion Papers
dp0267, Centre for Economic Performance, LSE.
- Puga, Diego & Venables, Anthony J., 1997. "Preferential trading arrangements and industrial location," Journal of International Economics, Elsevier, vol. 43(3-4), pages 347-368, November.
- Diego Puga & Tony Venables, 1995. "Preferential trading arrangements and industrial location," LSE Research Online Documents on Economics 2151, London School of Economics and Political Science, LSE Library.
- Puga, Diego & Venables, Anthony J., 1995. "Preferential Trading Arrangements and Industrial Location," CEPR Discussion Papers 1309, C.E.P.R. Discussion Papers.
- Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012.
"New Trade Models, Same Old Gains?,"
American Economic Review,
American Economic Association, vol. 102(1), pages 94-130, February.
- Arnaud Costinot & Andres Rodriguez-Clare & Costas Arkolakis, 2010. "New Trade Models, Same Old Gains?," 2010 Meeting Papers 433, Society for Economic Dynamics.
- Costas Arkolakis & Arnaud Costinot & Andrés Rodríguez-Clare, 2009. "New Trade Models, Same Old Gains?," NBER Working Papers 15628, National Bureau of Economic Research, Inc.
- Duranton, Gilles & Martin, Philippe & Mayer, Thierry & Mayneris, Florian, 2010. "The Economics of Clusters: Lessons from the French Experience," OUP Catalogue, Oxford University Press, number 9780199592203, October.
- Gaertner,Wulf & Schokkaert,Erik, 2011. "Empirical Social Choice," Cambridge Books, Cambridge University Press, number 9781107013940.
- Kristian Behrens & Andrea R. Lamorgese & Gianmarco I.P. Ottaviano & Takatoshi Tabuchi, 2007.
"Changes in transport and non transport costs: local vs. global impacts in a spatial network,"
Temi di discussione (Economic working papers)
628, Bank of Italy, Economic Research and International Relations Area.
- Behrens, Kristian & Lamorgese, Andrea R. & Ottaviano, Gianmarco I.P. & Tabuchi, Takatoshi, 2007. "Changes in transport and non-transport costs: Local vs global impacts in a spatial network," Regional Science and Urban Economics, Elsevier, vol. 37(6), pages 625-648, November.
- Kyle Bagwell & Robert W. Staiger, 2009. "Delocation and Trade Agreements in Imperfectly Competitive Markets," NBER Working Papers 15444, National Bureau of Economic Research, Inc.
- DEHEZ, Pierre & FEREY, Samuel, 2012.
"How to share joint liability: a cooperative game approach,"
CORE Discussion Papers
2012023, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Dehez, Pierre & Ferey, Samuel, 2013. "How to share joint liability: A cooperative game approach," Mathematical Social Sciences, Elsevier, vol. 66(1), pages 44-50.
- Richard E. Baldwin & Frederic Robert-Nicoud, 2000. "Free trade agreements without delocation," Canadian Journal of Economics, Canadian Economics Association, vol. 33(3), pages 766-786, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alain GILLIS).
If references are entirely missing, you can add them using this form.