IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/10769.html
   My bibliography  Save this paper

Social Networks and Trade Liberalization

Author

Listed:
  • Manish Pandey
  • John Whalley

Abstract

We discuss how social considerations can affect the desirability of trade liberalization in a conventional small open economy model. We consider a representative family in which there are location specific network effects from interactions with other family members, such as joint consumption, joint emotional support, and coinsurance. The benefits an individual receives from the network they participate in are nonlinearly related to the number of family members located in urban and rural areas. Family members choose whether to locate in urban or rural areas and average and marginal network benefits differ. With differential network effects in urban and rural areas, in a model with traded urban and rural goods, free trade will no longer be the best policy. We show this through a numerical example, and suggest that the conventional economists case for free trade may need to be more nuanced once social considerations of this type are taken into account.

Suggested Citation

  • Manish Pandey & John Whalley, 2004. "Social Networks and Trade Liberalization," NBER Working Papers 10769, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:10769
    Note: ITI
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w10769.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Fafchamps, Marcel & Lund, Susan, 2003. "Risk-sharing networks in rural Philippines," Journal of Development Economics, Elsevier, vol. 71(2), pages 261-287, August.
    2. Paul Winters & Alain de Janvry & Elisabeth Sadoulet, 2001. "Family and Community Networks in Mexico-U.S. Migration," Journal of Human Resources, University of Wisconsin Press, vol. 36(1), pages 159-184.
    3. Carrington, William J & Detragiache, Enrica & Vishwanath, Tara, 1996. "Migration with Endogenous Moving Costs," American Economic Review, American Economic Association, vol. 86(4), pages 909-930, September.
    4. Keshab Bhattarai & John Whalley, 2006. "The Division and Size of Gains from Liberalization in Service Networks," Review of International Economics, Wiley Blackwell, vol. 14(3), pages 348-361, August.
    5. Robert M. Townsend, 1995. "Consumption Insurance: An Evaluation of Risk-Bearing Systems in Low-Income Economies," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 83-102, Summer.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shan Li & Xun Li & Wei Lang & Haohui Chen & Xiaoguang Huang, 2021. "The Spatial and Mechanism Difference in the Export Evolution of Product Space in Global Countries," Sustainability, MDPI, vol. 13(4), pages 1-17, February.
    2. Arribas, Iván & Pérez, Francisco & Tortosa-Ausina, Emili, 2006. "Measuring International Economic Integration: Theory and Evidence of Globalization," MPRA Paper 16010, University Library of Munich, Germany, revised 2006.
    3. Don J. Webber & Michael Horswell, 2009. "Microeconomic foundations of geographical variations in labour productivity," Working Papers 0913, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    4. Arribas, Iván & Pérez, Francisco & Tortosa-Ausina, Emili, 2008. "On the Dynamics of Globalization," MPRA Paper 16007, University Library of Munich, Germany, revised 2008.
    5. Pérez, Francisco & Arribas, Iván & Tortosa-Ausina, Emili, 2009. "Openness and geographic neutrality: How do they contribute to international banking integration?," MPRA Paper 17211, University Library of Munich, Germany.
    6. Arribas, Iván & Pérez, Francisco & Tortosa-Ausina, Emili, 2009. "Measuring Globalization of International Trade: Theory and Evidence," World Development, Elsevier, vol. 37(1), pages 127-145, January.
    7. Janeba, Eckhard, 2007. "International trade and consumption network externalities," European Economic Review, Elsevier, vol. 51(4), pages 781-803, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mendola, Mariapia, 2017. "International migration and informal social protection in rural Mozambique," Research in Economics, Elsevier, vol. 71(2), pages 282-290.
    2. Abdurrahman B. Aydemir & Erkan Duman, 2021. "Migrant Networks and Destination Choice: Evidence from Moves across Turkish Provinces," Koç University-TUSIAD Economic Research Forum Working Papers 2109, Koc University-TUSIAD Economic Research Forum.
    3. Dercon, Stefan & De Weerdt, Joachim & Bold, Tessa & Pankhurst, Alula, 2006. "Group-based funeral insurance in Ethiopia and Tanzania," World Development, Elsevier, vol. 34(4), pages 685-703, April.
    4. Mano, Yukichi & Yamano, Takashi & Suzuki, Aya & Matsumoto, Tomoya, 2011. "Local and Personal Networks in Employment and the Development of Labor Markets: Evidence from the Cut Flower Industry in Ethiopia," World Development, Elsevier, vol. 39(10), pages 1760-1770.
    5. Omar Mahmoud, Toman & Trebesch, Christoph, 2009. "The Economic Drivers of Human Trafficking: Micro-Evidence from Five Eastern European Countries," Open Access Publications from Kiel Institute for the World Economy 39939, Kiel Institute for the World Economy (IfW Kiel).
    6. Jaramillo, Fernando & Kempf, Hubert & Moizeau, Fabien, 2015. "Heterogeneity and the formation of risk-sharing coalitions," Journal of Development Economics, Elsevier, vol. 114(C), pages 79-96.
    7. Quisumbing, Agnes R. & McNiven, Scott & Godquin, Marie, 2008. "Shocks, groups, and networks in Bukidnon, Philippines," CAPRi working papers 84, International Food Policy Research Institute (IFPRI).
    8. Michel BEINE & Frédéric DOCQUIER & Caglar,OZDEN, 2015. "Dissecting Network Externalities in International Migration," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 81(4), pages 379-408, December.
    9. Omar Mahmoud, Toman & Trebesch, Christoph, 2010. "The economics of human trafficking and labour migration: Micro-evidence from Eastern Europe," Journal of Comparative Economics, Elsevier, vol. 38(2), pages 173-188, June.
    10. Margherita Comola & Mariapia Mendola, 2015. "Formation of Migrant Networks," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(2), pages 592-618, April.
    11. Yoshito Takasaki & Bradford L. Barham & Oliver T. Coomes, 2010. "Smoothing Income against Crop Flood Losses in Amazonia: Rain Forest or Rivers as a Safety Net?," Review of Development Economics, Wiley Blackwell, vol. 14(1), pages 48-63, February.
    12. Farré, Lídia & Fasani, Francesco, 2013. "Media exposure and internal migration — Evidence from Indonesia," Journal of Development Economics, Elsevier, vol. 102(C), pages 48-61.
    13. Stefan Dercon, 2002. "Income Risk, Coping Strategies, and Safety Nets," The World Bank Research Observer, World Bank, vol. 17(2), pages 141-166, September.
    14. Angelucci Manuela & De Giorgi Giacomo & Rangel Marcos & Rasul Imran, 2009. "Village Economies and the Structure of Extended Family Networks," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-46, October.
    15. Parag Mahajan & Dean Yang, 2020. "Taken by Storm: Hurricanes, Migrant Networks, and US Immigration," American Economic Journal: Applied Economics, American Economic Association, vol. 12(2), pages 250-277, April.
    16. Ning Jia & Raven Molloy & Christopher Smith & Abigail Wozniak, 2023. "The Economics of Internal Migration: Advances and Policy Questions," Journal of Economic Literature, American Economic Association, vol. 61(1), pages 144-180, March.
    17. Sebastian Linnemayr, 2010. "Consumption Smoothing and HIV/AIDS: The Case of Two Communities in South Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 58(3), pages 475-506, April.
    18. Irac, D. & Minoiu, C., 2006. "Risk Insurance in a Transition Economy: Evidence from Rural Romania," Working papers 154, Banque de France.
    19. Jain, Prachi, 2020. "Imperfect monitoring and informal insurance: The role of social ties," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 241-256.
    20. Ahmed, Haseeb & Cowan, Benjamin, 2021. "Mobile money and healthcare use: Evidence from East Africa," World Development, Elsevier, vol. 141(C).

    More about this item

    JEL classification:

    • A1 - General Economics and Teaching - - General Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:10769. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.