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Understanding the Welfare Implications of Preferential Trade Agreements

In: International Trade Agreements and Political Economy

Author

Listed:
  • M. Ayhan Kose

    (Brandeis University, MS 021, Waltham, MA 02454, USA)

  • Raymond Riezman

    (University of Iowa, Iowa City, IA 52242, USA)

Abstract

This paper examines various implications of preferential trade agreements, namely customs unions and free trade areas, in the context of a multicountry general equilibrium model. The model is calibrated to represent countries with symmetric endowments, and aggregate and disaggregate welfare change measures are used to quantify the welfare effects of preferential trade agreements. It is found that free trade areas are better than customs unions on welfare grounds for the world as a whole. Welfare decompositions suggest that a significant fraction of the welfare changes is explained by the voiume-of-trade effect for both types of preferential trade agreements.

Suggested Citation

  • M. Ayhan Kose & Raymond Riezman, 2013. "Understanding the Welfare Implications of Preferential Trade Agreements," World Scientific Book Chapters, in: Raymond Riezman (ed.), International Trade Agreements and Political Economy, chapter 7, pages 85-99, World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789814390125_0007
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    Cited by:

    1. T. Huw Edwards & John Whalley, 2002. "Short and Long Run Decompositions of OECD Wage Inequality Changes," NBER Working Papers 9265, National Bureau of Economic Research, Inc.
    2. M. Ayhan Kose & Raymond Riezman, 2000. "Small Countries and Preferential Trade Agreements "How Severe is the Innocent Bystander Problem?"," CESifo Working Paper Series 253, CESifo.
    3. Conconi, Paola, 2000. "Trade Bloc Formation Under Imperfect Competition," Economic Research Papers 269342, University of Warwick - Department of Economics.

    More about this item

    Keywords

    International Trade; Political Economy; Theory of International Free Trade Agreements; Customs Unions; Tariff Dynamics; Storable Votes;
    All these keywords.

    JEL classification:

    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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