This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

A Ricardian Model with Endogenous Comparative Advantage and Endogenous Trade Policy Regimes

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Wen Li Cheng
Meng-chun Liu
Xiaokai Yang

Additional information is available for the following registered author(s):

Abstract

This paper develops a general equilibrium model with transaction costs and endogenous and exogenous comparative advantages. In the model, the governments are allowed to choose between tariff war, tariff negotiation, and laissez faire regimes. The model shows that the level of division of labor and the volume of trade increase as transaction conditions improve. In the process of moving to a high level of division of labour, a country may receive more gains from trade even if its terms of trade deteriorate. This is because an expansion of the network size of division of labour can generate productivity gains that outweigh the adverse effect of the terms of trade deterioration. When a high level of division of labor occurs in general equilibrium, if both countries play a Nash tariff game, a tariff war may break out, which can dissipate all the gains from trade. Facing this risk, all governments would prefer trade negotiations to a trade war. A Nash tariff negotiation would result in zero tariff rates. If a medium level of division of labor occurs in general equilibrium, then unilateral tariff protection and unilateral laissez faire policies would coexist. The result provides a plausible story about the evolution of trade policy regimes, and highlights the importance of trade negotiations in achieving trade liberalization.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. 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://www.cid.harvard.edu/cidwp/pdf/012.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Center for International Development at Harvard University in its series CID Working Papers with number 12.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Apr 1999
Date of revision:
Handle: RePEc:wop:cidhav:12

Contact details of provider:
Postal: Center for International Development at Harvard University (CID). 79 John F. Kennedy Street, Cambridge, MA 02138.
Email:
Web page: http://www.cid.harvard.edu/cidwp/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Thomas Krichel).

Related research
Keywords: inframarginal analysis of trade theory; Ricardo model; dual structure; underdevelopment;

Other versions of this item:

Find related papers by JEL classification:
O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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.:

  1. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September. [Downloadable!] (restricted)
    Other versions:
  2. Dixit, Avinash K & Kyle, Albert S, 1985. "The Use of Protection and Subsidies for Entry Promotion and Deterrence," American Economic Review, American Economic Association, vol. 75(1), pages 139-52, March. [Downloadable!] (restricted)
  3. Pomfret, R., 1992. "International Trade Policy with Imperfect Competition," Princeton Studies in International Economics 17, International Economics Section, Departement of Economics Princeton University,.
  4. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April. [Downloadable!] (restricted)
  5. Sun, Guang-Zhen & Yang, Xiaokai & Zhou, Lin, 2004. "General equilibria in large economies with endogenous structure of division of labor," Journal of Economic Behavior & Organization, Elsevier, vol. 55(2), pages 237-256, October. [Downloadable!] (restricted)
  6. Rosen, Sherwin, 1983. "Specialization and Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 43-49, January. [Downloadable!] (restricted)
  7. Yang, Xiaokai & Borland, Jeff, 1991. "A Microeconomic Mechanism for Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 460-82, June. [Downloadable!] (restricted)
  8. Gomory Ralph E., 1994. "A Ricardo Model with Economies of Scale," Journal of Economic Theory, Elsevier, vol. 62(2), pages 394-419, April. [Downloadable!] (restricted)
  9. Grossman, Gene M & Helpman, Elhanan, 1995. "Trade Wars and Trade Talks," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 675-708, August. [Downloadable!] (restricted)
    Other versions:
  10. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics. [Downloadable!]
  11. Henry J. Bruton, 1998. "A Reconsideration of Import Substitution," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 903-936, June. [Downloadable!] (restricted)
  12. Xiaokai Yang, 1994. "Endogenous vs. exogenous comparative advantage and economies of specialization vs. economies of scale," Journal of Economics, Springer, vol. 60(1), pages 29-54, February. [Downloadable!] (restricted)
  13. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June. [Downloadable!] (restricted)
  14. Bruton, H.J., 1998. "A Reconsideration of Import Substitution," Center for Development Economics 156, Department of Economics, Williams College.
  15. Pincus, J J, 1975. "Pressure Groups and the Pattern of Tariffs," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 757-78, August. [Downloadable!] (restricted)
  16. Grossman, Gene M & Helpman, Elhanan, 1995. "The Politics of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 85(4), pages 667-90, September. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, 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.)

  1. Hazel Parcon, 2008. "Disaggregating PTAs at the Role of International Division of Labor on PTA Formation," Working Papers 200806, University of Hawaii at Manoa, Department of Economics. [Downloadable!]
Statistics
Access and download statistics

Did you know? It is the publishers that input data about their publications, as there is no staff at RePEc.

This page was last updated on 2009-11-15.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.