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Winners And Losers From The Gradual Formation Of Trading Blocs

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  • Macho-Stadler

    ()

  • Licun Xue

    ()

Abstract

Although global free trade is efficient, each country’s benefit from free trade depends on the path that leads to the global free trade agreement. Using a dynamic model of trading bloc formation, we show that when global free trade is reached gradually, the countries that are initially excluded gain less than the rest and may be even made worse-off by the final free trade agreement, compared with the initial state of no trading blocs.

Suggested Citation

  • Macho-Stadler & Licun Xue, 2006. "Winners And Losers From The Gradual Formation Of Trading Blocs," Departmental Working Papers 2006-27, McGill University, Department of Economics.
  • Handle: RePEc:mcl:mclwop:2006-27
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    File URL: http://www.mcgill.ca/files/economics/winnersandlosers.pdf
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    References listed on IDEAS

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    1. Burbidge, John B. & James A. DePater & Gordon M. Meyers & Abhijit Sengupta, 1997. "A Coalition-Formation Approach to Equilibrium Federations and Trading Blocs," American Economic Review, American Economic Association, vol. 87(5), pages 940-956, December.
    2. Raymond RIEZMAN, 2013. "Customs Unions and the Core," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 3, pages 33-43 World Scientific Publishing Co. Pte. Ltd..
    3. Aghion, Philippe & Antras, Pol & Helpman, Elhanan, 2007. "Negotiating free trade," Journal of International Economics, Elsevier, vol. 73(1), pages 1-30, September.
    4. Kowalczyk, Carsten & Sjostrom, Tomas, 1994. "Bringing GATT into the Core," Economica, London School of Economics and Political Science, vol. 61(243), pages 301-317, August.
    5. John Kennan & Raymond Riezman, 2013. "Optimal Tariff Equilibria with Customs Unions," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 5, pages 53-66 World Scientific Publishing Co. Pte. Ltd..
    6. Hideo Konishi & Carsten Kowalczyk & Tomas Sjostrom, 2003. "Free Trade, Customs Unions, and Transfers," Boston College Working Papers in Economics 568, Boston College Department of Economics.
    7. Yi, Sang-Seung, 2000. "Free-Trade Areas and Welfare: An Equilibrium Analysis," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 336-347, May.
    8. Macho-Stadler, Ines & Perez-Castrillo, David & Ponsati, Clara, 1998. "Stable Multilateral Trade Agreements," Economica, London School of Economics and Political Science, vol. 65(258), pages 161-177, May.
    9. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February.
    10. repec:syd:wpaper:9713 is not listed on IDEAS
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    Cited by:

    1. Alejandro Caparrós & Jean-Christophe Péreau, 2017. "Multilateral versus sequential negotiations over climate change," Oxford Economic Papers, Oxford University Press, vol. 69(2), pages 365-387.
    2. Zhang, Jin & Cui, Zhiwei & Zu, Lei, 2014. "The evolution of free trade networks," Journal of Economic Dynamics and Control, Elsevier, vol. 38(C), pages 72-86.
    3. Seidmann, Daniel J., 2009. "Preferential trading arrangements as strategic positioning," Journal of International Economics, Elsevier, vol. 79(1), pages 143-159, September.
    4. Noritsugu Nakanishi, 2011. "Farsightedly Stable FTA Structures," Discussion Papers 1114, Graduate School of Economics, Kobe University.
    5. Fumi Kiyotaki & Toshiji Miyakawa, 2013. "Barriers to Global Free Trade through Bilateral Agreements," Review of International Economics, Wiley Blackwell, vol. 21(3), pages 536-548, August.
    6. Vesa Kanniainen & Staffan Ringbom, 2015. "The Value of NATO Option for a New Member," CESifo Working Paper Series 5399, CESifo Group Munich.

    More about this item

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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