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Countries, regions and trade: On the welfare impacts of economic integration

Author

Listed:
  • Kristian Behrens

    (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain)

  • Carl Gaigné

    (ESR - Unité de recherche d'Économie et Sociologie Rurales - INRA - Institut National de la Recherche Agronomique)

  • Gianmarco I.P. Ottaviano

    (UNIBO - Università di Bologna [Bologna], FEEM - Fondazione Eni Enrico Mattei - Fondazione Eni Enrico Mattei, CEPR - Center for Economic Policy Research - CEPR)

  • Jacques-François Thisse

    (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain, CEPR - Center for Economic Policy Research - CEPR, PJSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)

Abstract

We study the impact of falling international trade costs and falling national transport costs on the economic geography of countries involved in an integration process. Each country is formed by two regions between which labor is mobile, whereas there is no international mobility. Goods can be traded both nationally and internationally at positive, but different, costs. A decrease in trade costs and/or in transport costs has a direct impact on prices and wages, which allows us to account for the impact of changes in these parameters on the economic geography and welfare of each country. We show that, as trade barriers fall, the benefits of integration come after its costs. We also show that national transport policies are of the beggar-thy-neighbor type. On both counts, policy coordination is required in the process of economic integration.

Suggested Citation

  • Kristian Behrens & Carl Gaigné & Gianmarco I.P. Ottaviano & Jacques-François Thisse, 2007. "Countries, regions and trade: On the welfare impacts of economic integration," Post-Print halshs-00754213, HAL.
  • Handle: RePEc:hal:journl:halshs-00754213
    DOI: 10.1016/j.euroecorev.2006.08.005
    Note: View the original document on HAL open archive server: https://hal-pjse.archives-ouvertes.fr/halshs-00754213
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