Advanced Search
MyIDEAS: Login to save this paper or follow this series

Gradualism in Free Trade Agreements: A Theoretical Justification

Contents:

Author Info

  • Richard Chisik

    ()
    (Department of Economics, Ryerson University, Toronto, Canada)

Abstract

A notable feature of many recent trade agreements is the gradual, rather than immediate, reduction of trade barriers. In this paper we model trade liberalization as a cooperative relationship that evolves gradually in a non-cooperative environment. We show that specialization, capacity irreversibility and the development of trade-partner specific capital increase the benefit of continuing the liberalizing relationship and decrease, over time, the lowest obtainable self-enforcing tariff. By increasing the penalty of future defection, sunk costs ensure that the self-enforcing trading relationship starts slowly, but once in progress the level of cooperation continues to improve.

Download Info

If 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.
File URL: http://economics.ryerson.ca/workingpapers/wp018.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Ryerson University, Department of Economics in its series Working Papers with number 018.

as in new window
Length: 44 pages
Date of creation: Aug 2010
Date of revision:
Handle: RePEc:rye:wpaper:wp018

Contact details of provider:
Postal: 350 Victoria Street, Toronto, Ontario, M5B 2K3
Phone: (416) 979-5092
Fax: (415) 979-5273
Web page: http://www.ryerson.ca/economics/
More information through EDIRC

Related research

Keywords: Trade Negotiations; Gradualism; Irreversibilities; Economic Integration; Dynamic Games.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Kyle Bagwell, 1992. "Commitment and Observability in Games," Discussion Papers 1014, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Riezman, Raymond G., 1990. "Dynamic Tariffs with Asymmetric Information," Working Papers 720, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. Lapan, Harvey E., 1988. "The Optimal Tariff, Production Lags and Time Consistency," Staff General Research Papers 10816, Iowa State University, Department of Economics.
  4. Staiger, Robert W., 1995. "International rules and institutions for trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 29, pages 1495-1551 Elsevier.
  5. Kennan, John & Riezman, Raymond, 1988. "Do Big Countries Win Tariff Wars?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 81-85, February.
  6. Devereux, Michael B, 1997. "Growth, Specialization, and Trade Liberalization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 565-85, August.
  7. Staiger, Robert W & Tabellini, Guido, 1987. "Discretionary Trade Policy and Excessive Protection," American Economic Review, American Economic Association, vol. 77(5), pages 823-37, December.
  8. Halvor Mehlum, 1998. "Why gradualism?," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 7(3), pages 279-297.
  9. Lawrence M. Ausubel & Raymond J. Deneckere, 1987. "One is Almost Enough for Monopoly," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 255-274, Summer.
  10. Furusawa, Taiji & Lai, Edwin L. -C., 1999. "Adjustment costs and gradual trade liberalization," Journal of International Economics, Elsevier, vol. 49(2), pages 333-361, December.
  11. Lapham, Beverly, 1995. "Tariffs and Welfare in a Dynamic Differentiated Oligopoly," Review of International Economics, Wiley Blackwell, vol. 3(1), pages 60-74, February.
  12. Benhabib, Jess & Radner, Roy, 1992. "The Joint Exploitation of a Productive Asset: A Game-Theoretic Approach," Economic Theory, Springer, vol. 2(2), pages 155-90, April.
  13. Hungerford, Thomas L., 1991. "GATT: A cooperative equilibrium in a noncooperative trading regime?," Journal of International Economics, Elsevier, vol. 31(3-4), pages 357-369, November.
  14. Falvey, Rod & Kim, Cha Dong, 1992. "Timing and Sequencing Issues in Trade Liberalisation," Economic Journal, Royal Economic Society, vol. 102(413), pages 908-24, July.
  15. Kyle Bagwell & Robert W. Staiger, 1989. "A Theory of Managed Trade," Discussion Papers 801, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  16. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
  17. Mayer, Wolfgang, 1981. "Theoretical Considerations on Negotiated Tariff Adjustments," Oxford Economic Papers, Oxford University Press, vol. 33(1), pages 135-53, March.
  18. Rowat, M. & Lubrano, M. & Porrata, R.Jr., 1997. "Competition Policy and MERCOSUR," Papers 385, World Bank - Technical Papers.
  19. McLaren, John, 1997. "Size, Sunk Costs, and Judge Bowker's Objection to Free Trade," American Economic Review, American Economic Association, vol. 87(3), pages 400-420, June.
  20. Admati, Anat R & Perry, Motty, 1991. "Joint Projects without Commitment," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 259-76, April.
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 in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:rye:wpaper:wp018. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maurice Roche).

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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