Economic Effects of Forming Free Trade Agreement Between Technologically Asymmetric Countries and Optimal Government Policies

Young-Han Kim

Korean Economic Review, 2002, vol. 18, 111-128

Abstract: This paper examines the welfare effects of forming FTA between asymmetric countries in terms of technologies, and the influence of the technology asymmetry on the dynamic policy coordination for FTA. In addition, we determine the optimal policies with respect to FTA formation under incomplete information about the technology differences. We demonstrate that welfare gains for the FTA partner country with a higher technology is dominant to the welfare change to the home country with a lower technology, reducing the disagreement payoff of the partner country. In addition, with a higher technology asymmetry, efficient FTA policy coordination is less likely.

Keywords: FTA; technology assymetry; polocy coordination (search for similar items in EconPapers)
JEL-codes: F12 F13 F15 (search for similar items in EconPapers)
Date: 2002
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