Why are Trade Agreements Regional?

Benjamin Zissimos

No 1002, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics

Abstract: This paper shows how distance may be used to coordinate on a unique equilibrium in which trade agreements are regional. Trade agreement formation is modeled as coalition formation. In a standard trade model with no distance between countries a familiar problem of coordination failure occurs, giving rise to multiple equilibria; any one of many possible trade agreements can form. With distance between countries, regional trade agreements generate larger rent-shifting effects than non-regional agreements. Countries use these effects to coordinate on a unique equilibrium.

Keywords: Coalition; coordination; regionalism; preferential trade agreement; trade liberalization (search for similar items in EconPapers)
JEL-codes: C72 F02 F13 F15 (search for similar items in EconPapers)
Date: 2010-03
New Economics Papers: this item is included in nep-gth and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://www.accessecon.com/pubs/VUECON/vu10-w02.pdf Revised version, March 2010 (application/pdf)

Related works:
Journal Article: Why are Trade Agreements Regional? (2011)
Working Paper: Why are Trade Agreements Regional? (2007)
Working Paper: Why are Trade Agreements Regional? (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:van:wpaper:1002

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