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Industrial Targeting and Free Trade Areas


  • Grinols, Earl L.

    (U of Illinois at Urbana-Champaign)

  • Silva, Peri

    (U of Illinois at Urbana-Champaign)


In this paper we construct a mechanism where any group of nations can form a welfare enhancing free trade area and, at the same time, satisfy their industrialization targets efficiently. The mechanism does not rely on cross-country transfers and, therefore, allows each member country to reap welfare gains from the formation of the free trade area. Since industrialization targets are satisfied and neither tariff harmonization nor cross-country transfers are necessary, the mechanism presented in this paper is politically palatable.

Suggested Citation

  • Grinols, Earl L. & Silva, Peri, 2003. "Industrial Targeting and Free Trade Areas," Working Papers 03-0109, University of Illinois at Urbana-Champaign, College of Business.
  • Handle: RePEc:ecl:illbus:03-0109

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    More about this item

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • F15 - International Economics - - Trade - - - Economic Integration


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