A Geographic Approach to International Economics: 'Strategic Trade Policy'?
This paper introduces a trade cost asymmetry into the Core-periphery model to investigate the location effects of protection. Trade costs arise from the active choice of governments. In the case of a country that can decide the level of barriers to imports without retaliation by the other country, unilateral protection is shown to attract firms and to increase the welfare of residents. Since all countries face a rational incentive to unilateral protection, noncooperative behaviour may lead to an inefficient equilibrium with too much protection.
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- Baldwin, Richard & Venables, Anthony J, 1994. "International Migration, Capital Mobility and Transitional Dynamics," Economica, London School of Economics and Political Science, vol. 61(243), pages 285-300, August.
- Carlos M. Asilis & Luis Rivera-Batiz, 1994. "Geography, Trade Patterns, and Economic Policy," IMF Working Papers 94/16, International Monetary Fund.
- Paul Krugman, 1992. "A Dynamic Spatial Model," NBER Working Papers 4219, National Bureau of Economic Research, Inc. Full references (including those not matched with items on IDEAS)
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