Reciprocity, World Prices and Welfare

Pascalis Raimondos () and Alan Woodland

No 3607, CESifo Working Paper Series from CESifo

Abstract: We examine in detail the circumstances under which reciprocity, as defined in Bagwell and Staiger (1999), leads to fixed world prices. We show that a change of tariffs satisfying reciprocity does not necessarily imply constant world prices in a world of many goods and countries. While it is possible to find tariff reforms that are consistent with both reciprocity and constant world prices, these reforms do not follow from the reciprocity condition, but rather from the requirement of unchanged world prices. We propose an alternative reciprocity rule that is guaranteed to raise the welfare of all countries, independently of whether world prices change and independently of the relative numbers of goods and countries.

Keywords: GATT; reciprocity; fixed world prices (search for similar items in EconPapers)
JEL-codes: F02 F13 F15 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3607

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