Networks for Free Trade Agreements among Heterogeneous Countries

Ana Mauleon, Huasheng Song and Vincent Vannetelbosch

No 2006029, Discussion Papers (ECON - Département des Sciences Economiques) from Université catholique de Louvain, Département des Sciences Economiques

Abstract: The paper examnes the formation of free trade agreements as a network formation game. We consider a three-country model in which international trade occurs between economies with imperfectly competitive product markets. Labor markets can be unionized and non-unionized in each country. We show that if all countries are of the same type (all of them are either unionized or non-unionized), the global free trade network is both the unique pairwise stable network and the unique efficient network. If some countries are unionized while others are non-unionized, other networks apart from the global free trade network are likely to be pariwise stable. however the efficient network is always the global free trade network. Thus, a conflict between stability and efficiency may occur. Moreover, starting from the network in which no country has signed a free trade agreement, all sequences of networks due to continuously profitable deviations to do not lead (in most cases) to the global free trade network, even when global free trade is stable

Keywords: Free-trade agreements; Network formation games; Unionization (search for similar items in EconPapers)
JEL-codes: C70 F15 F16 (search for similar items in EconPapers)
Pages: 44
Date: 2006-06-01
New Economics Papers: this item is included in nep-gth, nep-int, nep-mic and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Networks of Free Trade Agreements among Heterogeneous Countries (2010)
Working Paper: Networks of free trade agreements among heterogeneous countries (2010)
Working Paper: Networks of free trade agreements among heterogeneous countries (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvec:2006029

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