Reciprocity, World Prices and Welfare
We examine in detail the circumstances under which reciprocity, as defined in Bagwell and Staiger (1999), leads to fixed world prices. We show that a change of tariffs satisfying reciprocity does not necessarily imply constant world prices in a world of many goods and countries. While it is possible to find tariff reforms that are consistent with both reciprocity and constant world prices, these reforms do not follow from the reciprocity condition, but rather from the requirement of unchanged world prices. We propose an alternative reciprocity rule that is guaranteed to raise the welfare of all countries, independently of whether world prices change and independently of the relative numbers of goods and countries.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ralph Ossa, 2011. "A “New Trade” Theory of GATT/WTO Negotiations," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 122 - 152.
- Emily Blanchard, 2006.
"Reevaluating the Role of Trade Agreements: Does Investment Globalization Make the WTO Obsolete?,"
CESifo Working Paper Series
1735, CESifo Group Munich.
- Blanchard, Emily J., 2010. "Reevaluating the role of trade agreements: Does investment globalization make the WTO obsolete?," Journal of International Economics, Elsevier, vol. 82(1), pages 63-72, September.
- John Kennan & Raymond Riezman, 2013.
"Optimal Tariff Equilibria with Customs Unions,"
World Scientific Book Chapters,
in: International Trade Agreements and Political Economy, chapter 5, pages 53-66
World Scientific Publishing Co. Pte. Ltd..
- Grinols, Earl L. & Silva, Peri, 2003.
"An Enhancement of Modern Free Trade Area Theory,"
03-0104, University of Illinois at Urbana-Champaign, College of Business.
- Paolo Epifani & Juliette Vitaloni, 2003.
"GATT-Think with Asymmetric Countries,"
Development Working Papers
175, Centro Studi Luca d\'Agliano, University of Milano.
- Turunen-Red, Arja H & Woodland, Alan D, 1991. "Strict Pareto-Improving Multilateral Reforms of Tariffs," Econometrica, Econometric Society, vol. 59(4), pages 1127-52, July.
- Ju, Jiandong & Krishna, Kala, 2000. "Welfare and market access effects of piecemeal tariff reform," Journal of International Economics, Elsevier, vol. 51(2), pages 305-316, August.
- Kowalczyk, Carsten & Sjostrom, Tomas, 2000. "Trade as transfers, GATT and the core," Economics Letters, Elsevier, vol. 66(2), pages 163-169, February.
- Robert W. Staiger & Kyle Bagwell, 1999.
"An Economic Theory of GATT,"
American Economic Review,
American Economic Association, vol. 89(1), pages 215-248, March.
- Raimondos-Moller, Pascalis & Woodland, Alan D., 2006.
"Non-preferential trading clubs,"
Journal of International Economics,
Elsevier, vol. 68(1), pages 79-91, January.
- Raimondos-Møller, Pascalis & Woodland , Alan D., 2006. "Non-Preferential Trading Clubs," Working Papers 06-2004, Copenhagen Business School, Department of Economics.
- Pascalis Raimondos-Møller & Alan D. Woodland, 2004. "Non-Preferential Trading Clubs," CESifo Working Paper Series 1145, CESifo Group Munich.
- Raimondos-Møller, Pascalis & Woodland, Alan D, 2002. "Non-Preferential Trading Clubs," CEPR Discussion Papers 3572, C.E.P.R. Discussion Papers.
- Panagariya, Arvind & Krishna, Pravin, 2002. "On necessarily welfare-enhancing free trade areas," Journal of International Economics, Elsevier, vol. 57(2), pages 353-367, August.
- Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February.
- Diewert, W E & Turunen-Red, A H & Woodland, A D, 1989. "Productivity- and Pareto-Improving Changes in Taxes and Tariffs," Review of Economic Studies, Wiley Blackwell, vol. 56(2), pages 199-215, April.
- Mattoo, Aaditya & Olarreaga, Marcelo, 2000. "Reciprocity Across Modes of Supply in the WTO: A Negotiating Formula," CEPR Discussion Papers 2481, C.E.P.R. Discussion Papers.
- Woodland, Alan D, 1980. "Direct and Indirect Trade Utility Functions," Review of Economic Studies, Wiley Blackwell, vol. 47(5), pages 907-26, October.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3607. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)
If references are entirely missing, you can add them using this form.