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Hub and spoke bilateralism and the global income distribution

Author

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  • Stibora, Joachim

    (Kingston University London)

  • de Vaal, Albert

    (Radboud University Nijmegen)

Abstract

We study the effects of hub and spoke liberalization in a model where income matters for consumption patterns. We use a three-country Ricardian trade model in which goods are ranked according to priority and where economies differ in their income level. The poorest (richest) country has a comparative advantage in the production of lowest-ranked (highest-ranked) goods, specializing in goods with low (high) income elasticities in demand. The medium rich country specializes in the production of the intermediate-ranked commodities. We find that a country’s income level is of decisive importance for assessing the impact of hub and spoke arrangements on welfare. Hubs do not necessarily gain and spokes do not necessarily lose.

Suggested Citation

  • Stibora, Joachim & de Vaal, Albert, 2006. "Hub and spoke bilateralism and the global income distribution," Economics Discussion Papers 2006-7, School of Economics, Kingston University London.
    • Handle: RePEc:ris:kngedp:2006_007
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    References listed on IDEAS

    as
    1. Stibora, Joachim & de Vaal, Albert, 2006. "Does preferential trade benefit poor countries? A general equilibrium assessment with nonhomothetic preferences," Economics Discussion Papers 2006-6, School of Economics, Kingston University London.
    2. Ethier,Wilfred J. & Helpman,Elhanan & Neary,J. Peter (ed.), 1993. "Theory, Policy and Dynamics in International Trade," Cambridge Books, Cambridge University Press, number 9780521434423.
    3. Baldwin, Richard E. & Venables, Anthony J., 1995. "Regional economic integration," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 31, pages 1597-1644, Elsevier.
    4. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762.
    5. Carsten Kowalczyk & Ronald J. Wonnacott, 1992. "Hubs and Spokes, and Free Trade in the Americas," NBER Working Papers 4198, National Bureau of Economic Research, Inc.
    6. Peter K. Schott, 2001. "Do Countries Specialize?," Yale School of Management Working Papers ysm173, Yale School of Management.
    7. Giuseppe Bertola & Reto Foellmi & Josef Zweimüller, 2005. "Income Distribution in Macroeconomic Models," Economics Books, Princeton University Press, edition 1, number 8058.
    8. Albert de Vaal & Joachim Stibora, 2006. "Does Preferential Trade Benefit Poor Countries? A General Equilibrium Assessment with Nonhomothetic Preferences," DEGIT Conference Papers c011_057, DEGIT, Dynamics, Economic Growth, and International Trade.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Ricardian trade model; asymmetric demand complementarities; nonho- mothetic preferences; global income distribution.;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General

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