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An Enhancement of Modern Free Trade Area Theory

Author

Listed:
  • Grinols, Earl L.

    (U of Illinois at Urbana-Champaign)

  • Silva, Peri

    (U of Illinois at Urbana-Champaign)

Abstract

This paper constructs a simplified framework for analyzing the welfare effects of free trade areas. We provide an alternative proof of the Panagariya-Krishna proposition on free trade areas, shortening the proof, covering a broader set of circumstances, and showing that the necessary income flows to guarantee welfare gains to all members are paid out of each country's own tariff revenues. The paper provides a close parallel to the important Kemp and Wan custom union theory.

Suggested Citation

  • Grinols, Earl L. & Silva, Peri, 2003. "An Enhancement of Modern Free Trade Area Theory," Working Papers 03-0104, University of Illinois at Urbana-Champaign, College of Business.
    • Handle: RePEc:ecl:illbus:03-0104
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    Cited by:

    1. Jaume Sempere, 2022. "On potential Pareto gains from free trade areas formation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(6), pages 1502-1518, December.
    2. Earl Grinols & Peri Silva, 2011. "Rules of origin and gains from trade," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(1), pages 159-173, May.
    3. Earl L. Grinols & Peri Silva, 2008. "Industrial targeting in free trade areas with policy independence," Canadian Journal of Economics, Canadian Economics Association, vol. 41(3), pages 796-816, August.
    4. Pascalis Raimondos & Alan D. Woodland, 2011. "Reciprocity, World Prices and Welfare," CESifo Working Paper Series 3607, CESifo.
    5. Jana Kovářová, 2014. "The Theory of the Free Trade Area As a Possible Form of Future Cooperation of the European Union with The US [Teorie pásma volného obchodu jako možné formy budoucí spolupráce Evropské unie s USA]," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2014(1), pages 56-71.

    More about this item

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • F15 - International Economics - - Trade - - - Economic Integration

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