International Trade, Regional Free Trade Agreements, and Economic Development

Scott Baier and Jeffrey Bergstrand

Review of Development Economics, 1997, vol. 1, issue 2, 153-170

Abstract: In 1991, Krugman illustrated that natural (regional) free trade agreements (FTAs) are likely to be welfare‐enhancing if intercontinental costs are prohibitively high, but are likely to be welfare‐reducing if such costs are zero. In 1995, Frankel, Stein and Wei extended the analysis to consider positive but nonprohibitive transport costs. This paper extends these models to allow for countries of different economic size. Large countries will tend to have higher relative wages, influencing the relative gains and losses from natural FTAs. For even modest differences in size, intracontinental FTAs are welfare‐enhancing for larger countries, regardless of strong preferences for diversity or low intercontinental transport costs.

Date: 1997
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://doi.org/10.1111/1467-9361.00011

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:rdevec:v:1:y:1997:i:2:p:153-170

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1363-6669

Access Statistics for this article

Review of Development Economics is currently edited by E. Kwan Choi

More articles in Review of Development Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().