Can a Preferential Trade Agreement Benefit Neighbor Countries without Compensating Them?
Masahiro Endoh,
Koichi Hamada and
Koji Shimomura
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Koichi Hamada: Yale U
Working Papers from Yale University, Department of Economics
Abstract:
PTAs are generally negotiated without any tariff concessions or transfers to non-member countries. Can such a PTA benefit the neighbors' welfare? In a two-good competitive equilibrium model in the absence of an entrepot, a PTA without concessions to the outsider will hurt the outsider's welfare when goods are normal. If one of the member countries is an entrepot, however, it definitely improves the neighbors' welfare. In a multiple-good model, a PTA without concessions deteriorates the neighbors' welfare, provided that all the goods are normal and substitutes, and that initial tariff levels are small.
JEL-codes: F11 (search for similar items in EconPapers)
Date: 2008-03
New Economics Papers: this item is included in nep-int
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