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Search and the Path-Dependency of Trade

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Abstract

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.

Suggested Citation

  • T. Huw Edwards, 2006. "Search and the Path-Dependency of Trade," Discussion Paper Series 2006_12, Department of Economics, Loughborough University, revised May 2006.
    • Handle: RePEc:lbo:lbowps:2006_12
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    File URL: http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/Huw_2006_12.pdf
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    Cited by:

    1. T. Huw Edwards, 2008. "Implicit trade Costs and European single market enlargement," Applied Economics, Taylor & Francis Journals, vol. 40(20), pages 2601-2613.

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    Keywords

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    JEL classification:

    • F00 - International Economics - - General - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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