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Dynamic Free Trade Networks: Some Numerical Results

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  • Hiroshi Daisaka
  • Taiji Furusawa

Abstract

To help predict whether the proliferation of free trade agreements (FTAs) continues until global free trade is effectively attained, this paper investigates dynamic paths of FTAs, generated by numerical simulations of a model of an FTA network formation game with many countries. The characteristics of the final FTA network naturally depend on how the proposer of an FTA is chosen in each period. The paper finds that if the country that has the largest incentive to form an FTA is chosen as a proposer in each period, the network evolution always leads to a unique final FTA network, which may or may not be the complete network of FTAs. FTA networks often evolve to a partition of the world into a small number of groups of asymmetric size owing to the negative network externality caused by preference erosion.

Suggested Citation

  • Hiroshi Daisaka & Taiji Furusawa, 2014. "Dynamic Free Trade Networks: Some Numerical Results," Review of International Economics, Wiley Blackwell, vol. 22(3), pages 469-487, August.
    • Handle: RePEc:bla:reviec:v:22:y:2014:i:3:p:469-487
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    File URL: http://hdl.handle.net/10.1111/roie.12126
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    References listed on IDEAS

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    3. Hideo Konishi & Minoru Nakada & Akihisa Shibata, 2024. "Free trade agreements with environmental provisions between asymmetric countries: transfer of clean technology and enforcement," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 26(1), pages 1-30, January.
    4. João Amador & Sónia Cabral & Rossana Mastrandrea & Franco Ruzzenenti, 2018. "Who’s Who in Global Value Chains? A Weighted Network Approach," Open Economies Review, Springer, vol. 29(5), pages 1039-1059, November.

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