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Tariff diversity and FTA network

Author

Listed:
  • Jihwan Do

    (Wuhan University)

  • Jung Hur

    (Sogang University)

  • Sung-Ha Hwang

    (Korea Advanced Institute of Science and Technology)

  • Larry D. Qiu

    (Lingnan University)

Abstract

The number of free trade agreements (FTAs) has increased in the past few decades, and the cross-country variation of the most-favored-nation (MFN) tariffs has decreased. Motivated by these two facts, we study whether the reduced variance in cross-country MFN tariffs can help explain the expansion of FTAs. Using an oligopolistic trade model with the equilibrium concept of pairwise stable networks, we reveal the existence of a set of pairwise stable network equilibria, where the number of FTAs rises as tariffs become increasingly symmetrical. This finding contributes to theoretical FTA literature by showing that an incomplete FTA network can be supported as a pairwise stable network equilibrium.

Suggested Citation

  • Jihwan Do & Jung Hur & Sung-Ha Hwang & Larry D. Qiu, 2023. "Tariff diversity and FTA network," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 159(2), pages 333-360, May.
    • Handle: RePEc:spr:weltar:v:159:y:2023:i:2:d:10.1007_s10290-022-00469-y
    DOI: 10.1007/s10290-022-00469-y
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    References listed on IDEAS

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    More about this item

    Keywords

    Free trade agreements; Pairwise stable networks; Tariffs;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration

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