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Cross-Sector Spillover Effects of Trade Liberalization


  • Aleksandr Vashchilko

    (Economics Department, KIMEP, 4 Abay ave., office 226, Almaty 050010, Kazakhatan.)


This work studies the effects of trade liberalization in a two-country two-sector model, with monopolistic competition and heterogeneous firms in one sector and perfect competition in the other. It is established that the spillover effect of the reduction in a sector's variable trade cost on the average productivity of firms in the other sector is sector dependent. The average productivity of firms increases and the number of firms decreases in the comparative advantage sector in response to the trade liberalization in the other sector. Conversely, the average productivity of firms decreases and the number of firms increases in the comparative disadvantage sector.

Suggested Citation

  • Aleksandr Vashchilko, 2013. "Cross-Sector Spillover Effects of Trade Liberalization," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 39(1), pages 1-17.
  • Handle: RePEc:pal:easeco:v:39:y:2013:i:1:p:1-17

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    References listed on IDEAS

    1. Davis, Donald R, 1998. "The Home Market, Trade, and Industrial Structure," American Economic Review, American Economic Association, vol. 88(5), pages 1264-1276, December.
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    7. Ming Chen & Yeung-Nan Shieh, 2011. "Specific commodity taxes, output and location decision under free entry oligopoly," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 47(1), pages 25-36, August.
    8. Haiwen Zhou, 2010. "Globalisation and the Size Distribution of Firms," The Economic Record, The Economic Society of Australia, vol. 86(272), pages 84-94, March.
    9. repec:hhs:iuiwop:430 is not listed on IDEAS
    10. Young, Allyn A., 1928. "Increasing Returns and Economic Progress," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 38, pages 527-542.
    11. Haiwen Zhou, 2007. "Oligopolistic Competition And Economic Geography," Journal of Regional Science, Wiley Blackwell, vol. 47(5), pages 915-933.
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