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Global Free Trade is in the Core of a Customs Union Game

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  • Hideo Konishi
  • Carsten Kowalczyk
  • Tomas Sjöström

Abstract

This paper shows nonemptiness of the core of a customs union game with a status quo equilibrium with tariffs by employing an appropriate notion of the core as in Kowalczyk and Sjöström (1994 , Economica ). Specifically, we find that if customs unions may have no effects on nonmember countries as in Ohyama (1972 , Keio Economic Studies ) and Kemp and Wan (1976 , Journal of International Economics ) then a subset of countries forming such a customs union does not block global free trade when accompanied by so-called Grinols transfers ( Grinols, 1981 , Journal of International Economics ). Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd.

Suggested Citation

  • Hideo Konishi & Carsten Kowalczyk & Tomas Sjöström, 2009. "Global Free Trade is in the Core of a Customs Union Game," Review of International Economics, Wiley Blackwell, vol. 17(SI), pages 304-309, May.
  • Handle: RePEc:bla:reviec:v:17:y:2009:i:si:p:304-309
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    References listed on IDEAS

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    1. Raymond RIEZMAN, 2013. "Customs Unions and the Core," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 3, pages 33-43 World Scientific Publishing Co. Pte. Ltd..
    2. Grandmont, J. M. & McFadden, D., 1972. "A technical note on classical gains from trade," Journal of International Economics, Elsevier, vol. 2(2), pages 109-125, May.
    3. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February.
    4. Kowalczyk, Carsten & Sjostrom, Tomas, 1994. "Bringing GATT into the Core," Economica, London School of Economics and Political Science, vol. 61(243), pages 301-317, August.
    5. Kowalczyk, Carsten & Sjostrom, Tomas, 2000. "Trade as transfers, GATT and the core," Economics Letters, Elsevier, vol. 66(2), pages 163-169, February.
    6. Murray C. Kemp & Koji Shimomura, 2001. "A Second Elementary Proposition Concerning the Formation of Customs Unions," The Japanese Economic Review, Japanese Economic Association, vol. 52(1), pages 64-69.
    7. John Kennan & Raymond Riezman, 2013. "Optimal Tariff Equilibria with Customs Unions," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 5, pages 53-66 World Scientific Publishing Co. Pte. Ltd..
    8. Bond, Eric W. & Syropoulos, Constantinos, 1996. "The size of trading blocs Market power and world welfare effects," Journal of International Economics, Elsevier, vol. 40(3-4), pages 411-437, May.
    9. Grinols, Earl L., 1981. "An extension of the Kemp-Wan theorem on the formation of customs unions," Journal of International Economics, Elsevier, vol. 11(2), pages 259-266, May.
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    Cited by:

    1. Seidmann, Daniel J., 2009. "Preferential trading arrangements as strategic positioning," Journal of International Economics, Elsevier, vol. 79(1), pages 143-159, September.
    2. Earl Grinols & Peri Silva, 2011. "Rules of origin and gains from trade," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(1), pages 159-173, May.
    3. Hideo Konishi & Carsten Kowalczyk & Tomas Sjostrom, 2003. "Free Trade, Customs Unions, and Transfers," Boston College Working Papers in Economics 568, Boston College Department of Economics.

    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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