Social Networks and Trade Liberalization
We discuss how social considerations can affect the desirability of trade liberalization in a conventional small open economy model. We consider a representative family in which there are location specific network effects from interactions with other family members, such as joint consumption, joint emotional support, and coinsurance. The benefits an individual receives from the network they participate in are nonlinearly related to the number of family members located in urban and rural areas. Family members choose whether to locate in urban or rural areas and average and marginal network benefits differ. With differential network effects in urban and rural areas, in a model with traded urban and rural goods, free trade will no longer be the best policy. We show this through a numerical example, and suggest that the conventional economists case for free trade may need to be more nuanced once social considerations of this type are taken into account.
|Date of creation:||Sep 2004|
|Date of revision:|
|Publication status:||published as Manish Pandey & John Whalley, 2009. "Social networks and trade liberalization," Applied Economics Letters, Taylor and Francis Journals, vol. 16(17), pages 1747-1749.|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.orgEmail:
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul Winters & Alain de Janvry & Elisabeth Sadoulet, 2001.
"Family and Community Networks in Mexico-U.S. Migration,"
Journal of Human Resources,
University of Wisconsin Press, vol. 36(1), pages 159-184.
- Winters, Paul C. & de Janvry, Alain & Sadoulet, Elisabeth, 1999. "Family And Community Networks In Mexico-U.S. Migration," Working Papers 12907, University of New England, School of Economics.
- Carrington, William J & Detragiache, Enrica & Vishwanath, Tara, 1996. "Migration with Endogenous Moving Costs," American Economic Review, American Economic Association, vol. 86(4), pages 909-30, September.
- Marcel Fafchamps & Susan Lund, 2000.
"Risk-Sharing Networks in Rural Philippines,"
Economics Series Working Papers
10, University of Oxford, Department of Economics.
- Keshab Bhattarai & John Whalley, 1998.
"The Division and Size of Gains from Liberalization of Service Networks,"
NBER Working Papers
6712, National Bureau of Economic Research, Inc.
- Keshab Bhattarai & John Whalley, 2006. "The Division and Size of Gains from Liberalization in Service Networks," Review of International Economics, Wiley Blackwell, vol. 14(3), pages 348-361, 08.
- Bhattarai, Keshab & John Whalley, 1998. "The Division and Size of Gains from Liberalization in Service Networks," CSGR Working papers series 03/98, Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick.
- Robert M. Townsend, 1995. "Consumption Insurance: An Evaluation of Risk-Bearing Systems in Low-Income Economies," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 83-102, Summer.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:10769. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.