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The Gains from Trade Liberalization


  • Brown, Donald J.

    (Yale U)

  • Srinivasan, T. N.


We consider trade liberalization in a multilateral trade model, where countries have identical, homothetic tastes but may have different constant returns to scale technologies that produce at least two goods from at least two factors. We introduce the notion of a world equilibrium with transfers and show that Debreu's coefficient of resource utilization or CRU defines a world equilibrium with transfers where all countries are better off in the free trade equilibrium, after trade liberalization, than they were in the distorted world equilibrium. In particular, after trade liberalization, the poor countries of the world are better off in the CRU world equilibrium with transfers than in the free trade world equilibrium without transfers.

Suggested Citation

  • Brown, Donald J. & Srinivasan, T. N., 2007. "The Gains from Trade Liberalization," Working Papers 24, Yale University, Department of Economics.
  • Handle: RePEc:ecl:yaleco:24

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    References listed on IDEAS

    1. Diewert, W Erwin, 1983. " The Measurement of Waste within the Production Sector of an Open Economy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 85(2), pages 159-179.
    2. Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521266550.
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    Cited by:

    1. repec:eee:jcecon:v:45:y:2017:i:4:p:847-864 is not listed on IDEAS
    2. Datta, Manjira, 2017. "Existence and uniqueness of equilibrium in a distorted dynamic small open economy," Economics Letters, Elsevier, vol. 152(C), pages 19-22.

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    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies


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