Understanding the Welfare Implications of Preferential Trade Agreements

Ayhan Kose and Raymond Riezman

Review of International Economics, 2000, vol. 8, issue 4, 619-633

Abstract: This paper examines various implications of preferential trade agreements, namely customs unions and free trade areas, in the context of a multicountry general equilibrium model. The model is calibrated to represent countries with symmetric endowments, and aggregate and disaggregate welfare change measures are used to quantify the welfare effects of preferential trade agreements. It is found that free trade areas are better than customs unions on welfare grounds for the world as a whole. Welfare decompositions suggest that a significant fraction of the welfare changes is explained by the volume‐of‐trade effect for both types of preferential trade agreements.

Date: 2000
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https://doi.org/10.1111/1467-9396.00246

Related works:
Chapter: Understanding the Welfare Implications of Preferential Trade Agreements (2013)
Working Paper: Understanding the Welfare Implications of Preferential Trade Agreements (1999)
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