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No trade, one-way or two-way trade?

Author

Listed:
  • Toshihiro Okubo

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

  • Pierre M. Picard

    (CREA, University of Luxembourg (Luxembourg) and CORE, Université catholique de Louvain (Belgium))

  • Jacques-François Thisse

    (CORE, Université catholique de Louvain (Belgium), Université du Luxembourg (Luxembourg), CEPR (UK), and RIEB, Kobe University (Japan))

Abstract

We study how the level of trade costs and the intensity of competition can explain the existence of two-way, one-way or no trade within the same industry. As trade costs decrease from very high to very low values, the economy moves from autarky to a regime of two-way trade, through a regime of one-way trade from the larger to the smaller country. Trade is less likely when the economy gets more competitive. Finally once capital is mobile across countries, the market delivers an outcome in which capital is too much concentrated in the large country.

Suggested Citation

  • Toshihiro Okubo & Pierre M. Picard & Jacques-François Thisse, 2011. "No trade, one-way or two-way trade?," Discussion Paper Series DP2011-14, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2011-14
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2011-14.pdf
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    Cited by:

    1. Goksel, Turkmen, 2012. "Financial constraints and international trade patterns," Economic Modelling, Elsevier, vol. 29(6), pages 2222-2225.

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    Keywords

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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