Chapter 22 Free Trade between Large and Small: What's in it for the Large Country? What's in it for the Small?

Carsten Kowalczyk

A chapter in Contemporary and Emerging Issues in Trade Theory and Policy, 2008, pp 417-427 from Emerald Group Publishing Limited

Abstract: This chapter provides a formal analysis of the economic welfare effects for large and small partners to free trade agreements. Michaely (1998) has demonstrated that large country welfare is U-shaped in the small country's size. I derive the welfare for the large country for all possible small country sizes, and show that the maximum possible loss for the large country is twice its tariff revenue. I identify the data necessary to estimate the welfare effects and consider how initial trade volumes, tariffs, and international price differences affect the large country's welfare.

Keywords: Small countries; large countries; free trade areas (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eme:fegzzz:s1574-8715(08)04022-0

DOI: 10.1016/S1574-8715(08)04022-0

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