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Preferential Trade Arrangements, Induced Investment, and National Income in a Heckscher-Ohlin-Ramsey Model


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  • Joseph Francois

    (Erasmus University Rotterdam, and CEPR)

  • M. Rombout

    (Erasmus University Rotterdam)


We develop a Heckscher-Ohlin-Ramsey model, combining dual techniqueswith classic geometric techniques fromtrade theory. This framework is used to explore the long-run generalequilibrium effects of regional integration(preferential trade agreements). Emphasis is placed on positivemechanics related to adjustment in the capitalstock, long-run changes in the pattern in trade, and the implicationsfor changes in long-run (steady-state)national income. The importance of relative country size and thedynamic implications for third countries are alsoaddressed.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 00-061/2.

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Date of creation: 31 Jul 2000
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Handle: RePEc:dgr:uvatin:20000061

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Keywords: regionalism; trade and investment; preferential trade arrangements; Heckscher Ohlin Ramsey model; trade and growth;

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  1. Marianne Baxter, 1991. "Fiscal policy, specialization, and trade in the two-sector model: the return of Ricardo?," Discussion Paper / Institute for Empirical Macroeconomics, Federal Reserve Bank of Minneapolis 56, Federal Reserve Bank of Minneapolis.
  2. Manning, R. & Markusen, J.R., 1988. "National Product Functions In Comparative Steady-State Analysis," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers, University of Western Ontario, The Centre for the Study of International Economic Relations 8808c, University of Western Ontario, The Centre for the Study of International Economic Relations.
  3. Atsumi, Hiroshi, 1971. "The long-run offer function and a dynamic theory of international trade," Journal of International Economics, Elsevier, Elsevier, vol. 1(3), pages 267-299, August.
  4. Fernandez, Raquel & Portes, Jonathan, 1998. "Returns to Regionalism: An Analysis of Nontraditional Gains from Regional Trade Agreements," World Bank Economic Review, World Bank Group, World Bank Group, vol. 12(2), pages 197-220, May.
  5. Johnson, Harry G., 1971. "Trade and growth : A geometrical exposition," Journal of International Economics, Elsevier, Elsevier, vol. 1(1), pages 83-101, February.
  6. Schiff, Maurice & Winters, L Alan, 1998. "Dynamics and Politics in Regional Integration Arrangements: An Introduction," World Bank Economic Review, World Bank Group, World Bank Group, vol. 12(2), pages 177-95, May.
  7. Ethier, Wilfred, 1979. "The theorems of international trade in time-phased economies," Journal of International Economics, Elsevier, Elsevier, vol. 9(2), pages 225-238, May.
  8. Kenā€ichi Inada, 1968. "Free Trade, Capital Accumulation and Factor Price Equalization," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 44(3), pages 322-341, 09.
  9. Wonnacott, Paul & Wonnacott, Ronald, 1981. "Is Unilateral Tariff Reduction Preferable to a Customs Union? The Curious Case of the Missing Foreign Tariffs," American Economic Review, American Economic Association, American Economic Association, vol. 71(4), pages 704-14, September.
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