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Search and the Path-Dependency of Trade

This paper investigates the implications of imperfect information and matching/searching for international trade theory. I develop an illustrative model where firms find such partners by a search through successive matches. The consequences include linking today's import demand patterns to past changes in costs, protection and interest rates. Today's policy decisions will likewise affect future trade. Trade diversion from a preferential trading agreement may well persist as informational diversion well after the preferential agreement has been scrapped. This has important implications for the timing of trade liberalisation.

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File URL: http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/Huw_2006_12.pdf
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Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2006_12.

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Date of creation: May 2006
Date of revision: May 2006
Handle: RePEc:lbo:lbowps:2006_12
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Web page: http://www.lboro.ac.uk/departments/sbe/research/economics/index.html

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