The evolution of free trade networks

Jin Zhang, Zhiwei Cui and Lei Zu

Journal of Economic Dynamics and Control, 2014, vol. 38, issue C, 72-86

Abstract: This paper considers the evolutionary dynamics of a free trade agreement (FTA) network formation game among N countries. We first explore the static model introduced by Goyal and Joshi (2006) and precisely characterize the set of pairwise stable FTA networks. Then, we develop a dynamic model under random perturbations and identify long-run outcomes to remove prediction uncertainty inherited from static analysis. The results show that both partial free trade and global free trade will result when there are only three countries. However, when more countries are involved, only the complete FTA network emerges.

Keywords: Free trade agreements; Global free trade; Network formation game; Stochastic stability analysis (search for similar items in EconPapers)
JEL-codes: C73 F15 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:38:y:2014:i:c:p:72-86

DOI: 10.1016/j.jedc.2013.09.004

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