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Bilateral Trade between India and Bangladesh: A General Equilibrium Approach

In: Input–Output Economics: Theory And Applications Featuring Asian Economies

Author

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  • Chandrima Sikdar
  • Thijs ten Raa
  • Pierre Mohnen
  • Debesh Chakraborty

Abstract

India and Bangladesh pursued policies of trade liberalization since the early 1990s. However, due to the differential speeds of opening up, Bangladesh's bilateral trade deficit with India widened substantially over the years. This aggravated the economic and the political tensions between the economies. It has been held that the promotion of free trade between the two economies may enhance trade and hence economic cooperation between them. Against this backdrop, the present chapter proposes a theoretical framework which provides a general equilibrium determination of the commodity pattern of trade and hence locates the comparative advantages of the economies. The empirical implementation of the model considers trade in 25 sectors comparable in the input–output tables of the economies. The study isolates the gains from free trade accruing to either economy. The chapter also explores the pattern of bilateral trade when each economy produces goods by utilizing their own, as well as the other country's technology. The gains from this trading arrangement are also isolated.

Suggested Citation

  • Chandrima Sikdar & Thijs ten Raa & Pierre Mohnen & Debesh Chakraborty, 2009. "Bilateral Trade between India and Bangladesh: A General Equilibrium Approach," World Scientific Book Chapters, in: Input–Output Economics: Theory And Applications Featuring Asian Economies, chapter 25, pages 487-518, World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789812833679_0025
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    1. Davis, Donald R. & David E. Weinstein & Scott C. Bradford & Kazushige Shimpo, 1997. "Using International and Japanese Regional Data to Determine When the Factor Abundance Theory of Trade Works," American Economic Review, American Economic Association, vol. 87(3), pages 421-446, June.
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    4. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-987, December.
    5. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-1046, December.
    6. Bowen, Harry P & Leamer, Edward E & Sveikauskas, Leo, 1987. "Multicountry, Multifactor Tests of the Factor Abundance Theory," American Economic Review, American Economic Association, vol. 77(5), pages 791-809, December.
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    Cited by:

    1. Tarancon, Miguel Angel & Del Río, Pablo, 2012. "Assessing energy-related CO2 emissions with sensitivity analysis and input-output techniques," Energy, Elsevier, vol. 37(1), pages 161-170.

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    More about this item

    Keywords

    Input–Output Analysis; National Accounts; Productivity; Performance; Canadian Economy; Chinese Economy; Indian Economy; Asian Economics;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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