Differences between domestic financial systems can lead to international trade. A country with relatively developed or decentralized financial systems will export innovative commodities while a country with less developed and centralized financial systems will export traditional commodities. Trade is always welfare improving before the resolution of uncertainty but the country with the more risk averse financial system and the world as a whole can be worse off with trade after the resolution of uncertainty. A temporary protection can be welfare improving for such risk averse countries which are often the less developed ones.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
15650.
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