A Theory of Insidious Regionalism
John McLaren
The Quarterly Journal of Economics, 2002, vol. 117, issue 2, 571-608
Abstract:
This paper presents an interpretation of rising regionalism in world trade as a coordination failure, based on (i) sector-specific sunk costs in production, and (ii) "friction" in trade negotiation. Given these elements, if a regional trade bloc is expected to form, private agents will make investments that will make bloc member countries more specialized toward each other, but bloc and nonbloc countries mutually less specialized. This diminishes the ex post demand for multilateral free trade. Thus, the expected supply of regionalism generates its own demand, creating a Pareto-inferior equilibrium.
Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (77)
Downloads: (external link)
http://hdl.handle.net/10.1162/003355302753650337 (application/pdf)
Access to full text is restricted to subscribers.
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:oup:qjecon:v:117:y:2002:i:2:p:571-608.
Ordering information: This journal article can be ordered from
https://academic.oup.com/journals
Access Statistics for this article
The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva
More articles in The Quarterly Journal of Economics from President and Fellows of Harvard College
Bibliographic data for series maintained by Oxford University Press ().