Overcoming Informational Barriers to International Resource Allocation: Prices and Ties

James Rauch and Alessandra Casella

Economic Journal, 2003, vol. 113, issue 484, 21-42

Abstract: Incomplete information creates matching friction that interferes with the ability of prices to allocate scarce resources across countries but can be overcome by international information--sharing networks. When the difference between country factor--endowment ratios is large relative to network ties, efficient arbitrage breaks down, the price (wage) of each country"s immobile resource becomes partially insulated from changes in foreign supply, and trade liberalisation causes less resource price convergence. The model is applied to the trade and wages debate, to whether ties can reduce world welfare through trade diversion, and to the effect of ties on trade in differentiated versus homogeneous products. Copyright Royal Economic Society 2003.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (209)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Overcoming Informational Barriers to International Resource Allocation: Prices and Ties (2001)
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:ecj:econjl:v:113:y:2003:i:484:p:21-42

Ordering information: This journal article can be ordered from
http://www.blackwell ... al.asp?ref=0013-0133

Access Statistics for this article

Economic Journal is currently edited by Martin Cripps, Steve Machin, Woulter den Haan, Andrea Galeotti, Rachel Griffith and Frederic Vermeulen

More articles in Economic Journal from Royal Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().