IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Preferential Trade and Welfare with Differentiated Products

Author Info

Listed author(s):
  • Denise Eby Konan

    ()

    (Department of Economics, University of Hawaii at Manoa and University of Hawaii Economic Research Organization)

  • Keith E. Maskus

    ()

    (Department of Economics, University of Colorado at Boulder)

Abstract

We consider analytically and numerically the welfare tradeoffs inherent in a preferential trade area (PTA) with products differentiated by region of origin. For a small open economy in such a setting, welfare gains are associated with higher trade volumes within the PTA. However, welfare losses are induced by declining tariff revenues on trade with nonmember countries. We show that both effects are concave, while one is a non-monotonic and the other a potentially non-monotonic function of pre-PTA partner trade shares. Therefore, the relationship between initial partner import shares and direct static welfare impacts of a PTA are theoretically ambiguous. This finding contrasts with conventional results in the homogeneous-goods case, whereby the smaller is the pre-agreement trade volume with a potential partner the more beneficial is a PTA.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.uhero.hawaii.edu/assets/WP_2011-8.pdf
File Function: First version, 2011
Download Restriction: no

Paper provided by University of Hawaii Economic Research Organization, University of Hawaii at Manoa in its series Working Papers with number 2011-8.

as
in new window

Length: 20 pages
Date of creation: Feb 2011
Handle: RePEc:hae:wpaper:2011-8
Contact details of provider: Postal:
2424 Maile Way, Social Sciences Building 542, Honolulu, Hawaii 96822

Fax: (808) 956-2889
Web page: http://www.uhero.hawaii.edu

More information through EDIRC

Keywords: preferential trade agreements; differentiated products;

Other versions of this item:

Find related papers by JEL classification:
  • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
  • F15 - International Economics - - Trade - - - Economic Integration

References listed on IDEAS
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.:

as
in new window


  1. Eric W. Bond & Raymond G. Riezman & Constantinos Syropoulos, 2013. "A strategic and welfare theoretic analysis of free trade areas," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 8, pages 101-127 World Scientific Publishing Co. Pte. Ltd..
  2. Furusawa, Taiji & Konishi, Hideo, 2007. "Free trade networks," Journal of International Economics, Elsevier, vol. 72(2), pages 310-335, July.
  3. Chen, Maggie Xiaoyang & Joshi, Sumit, 2010. "Third-country effects on the formation of free trade agreements," Journal of International Economics, Elsevier, vol. 82(2), pages 238-248, November.
  4. Raymond RIEZMAN, 2013. "A 3 × 3 Model of Customs Unions," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 1, pages 7-20 World Scientific Publishing Co. Pte. Ltd..
Full references (including those not matched with items on IDEAS)

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

as
in new window


Cited by:

  1. Benjamin Bridgman & Michael Maio & James A. Schmitz, 2012. "What ever happened to the Puerto Rican sugar manufacturing industry?," Staff Report 477, Federal Reserve Bank of Minneapolis.
  2. Denise Eby Konan & Keith E Maskus, 2000. "Bilateral Trade Patterns and Welfare: An Egypt-EU Preferential Trade Agreement," Working Papers 200001, University of Hawaii at Manoa, Department of Economics.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:hae:wpaper:2011-8. 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: (UHERO)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.