An extended Viner Model: Trade creation, diversion & reduction
AbstractIn this paper, we are going to reconsider the standard Viner Model [Viner, 1950] however under the premise of firm heterogeneity. By means of a graphical analysis we show that a consideration of the degree of firm heterogeneity is important for an evaluation of a preferential trade agreement. Depending on the degree of firm heterogeneity in the preferential country and the non-preferential country either a price increase and trade creation occurs or a price decrease and trade reduction. The standard Viner Model neither makes any predictions with regard to price changes nor can it explain trade reduction. The graphical analysis conducted here yields additional insights into the impacts of preferential trade agreements on trade. --
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Bibliographic InfoPaper provided by Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE) in its series DARE Discussion Papers with number 1210.
Date of creation: 2012
Date of revision:
International Trade; Preferential Trade Agreements; Viner Model; Firm Heterogeneity; Intensive Margin; Extensive Margin;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-13 (All new papers)
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.:
- Marc J. Melitz, 2003.
"The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity,"
Econometric Society, vol. 71(6), pages 1695-1725, November.
- Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
- Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
- Busse, Stefan & Brümmer, Bernard & Ihle, Rico, 2010. "Interdependencies between fossil fuel and renewable energy markets: the German biodiesel market," DARE Discussion Papers 1010, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
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