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Sustainable cooperation in international trade: A quantitative analysis

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  • Mei, Yuan

Abstract

How does the presence of multilateral institutions affect the sustainability of trade-policy cooperation? Do free-trade agreements make multilateral cooperation less sustainable? Will countries be more likely to deviate from negotiated tariffs when more trade liberalization realizes in the future? These questions have been studied in theory literature using models that feature repeated games, but have yet to be quantitatively analyzed. In this paper, I propose a methodology to quantitatively characterize the equilibrium strategies on tariffs of various nations in a widely used repeated-game framework. I then apply this methodology to address these questions from a quantitative perspective. The numerical results computed from a reasonably comprehensive general equilibrium trade model corroborate previous analysis derived theoretically from simpler trade models. However, only free-trade agreements appear to influence the sustainability of trade-policy cooperation with quantitative significance.

Suggested Citation

  • Mei, Yuan, 2020. "Sustainable cooperation in international trade: A quantitative analysis," Journal of International Economics, Elsevier, vol. 123(C).
    • Handle: RePEc:eee:inecon:v:123:y:2020:i:c:s0022199620300246
    DOI: 10.1016/j.jinteco.2020.103305
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    Cited by:

    1. Ning Zhu & Xiang Dai & Tomas Baležentis & Dalia Streimikiene & Zhiyang Shen, 2022. "Estimating production gains from international cooperation: Evidence from countries along the Belt and Road," Economic Change and Restructuring, Springer, vol. 55(2), pages 715-736, May.
    2. Gustavo de Souza & Naiyuan Hu & Haishi Li & Yuan Mei, 2022. "(Trade) War and Peace: How to Impose International Trade Sanctions," Working Paper Series WP 2022-49, Federal Reserve Bank of Chicago.
    3. Gustavo de Souza & Naiyuan Hu & Haishi Li & Yuan Mei, 2023. "(Trade) War and Peace: How to Impose International Trade Sanctions," CESifo Working Paper Series 10477, CESifo.

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    More about this item

    Keywords

    Propensity to deviate; Quantitative trade policy; Repeated game;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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