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Myopic or farsighted : bilateral trade agreements among three symmetric countries

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  • Tsubota, Kenmei
  • Kawasaki, Yujiro

Abstract

We examine network formation via bilateral trade agreement (BTA) among three symmetric countries. Each government decides whether to form a link or not via a BTA depending on the differential of ex-post and ex-ante sum of real wages in the country. We model the governmental decision in two forms, myopic and farsighted and analyze the effects on the BTA network formation. First, we find that both myopic and farsighted games never induce the formation of star networks nor empty networks. Second, the networks resulting from myopic game coincides with those resulting from farsighted games.

Suggested Citation

  • Tsubota, Kenmei & Kawasaki, Yujiro, 2011. "Myopic or farsighted : bilateral trade agreements among three symmetric countries," IDE Discussion Papers 274, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  • Handle: RePEc:jet:dpaper:dpaper274
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    More about this item

    Keywords

    International trade; International agreements; Trade policy; Endogenous network formation; Bilateral trade agreement; Myopic and farsighted behavior;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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