Networks of free trade agreements among heterogeneous countries

Ana Mauleon, Huasheng Song and Vincent Vannetelbosch

No 2006053, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: The paper examines the formation of free trade agreements as a network formation game. We consider a three-country model in which international trade occurs between economies with imperfectly competitive product markets. Labor markets can be unionized and non-unionized in each country. We show that if all countries are of the same type (all of them are either unionized or non-unionized), the global free trade network is both the unique pairwise stable network and the unique efficient network. If some countries are unionized while others are non-unionized, other networks apart from the global free trade network are likely to be pairwise stable. However, the efficient network is always the global free trade network. Thus, a conflict between stability and efficiency may occur. Moreover, starting from the network in which no country has signed a free trade agreement, all sequences of networks due to continuously profitable deviations do not lead (in most cases) to the global free trade network, even when global free trade is stable.

Keywords: free-trade agreements; network formation game; unionization (search for similar items in EconPapers)
JEL-codes: C70 F15 F16 (search for similar items in EconPapers)
Date: 2006-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://sites.uclouvain.be/core/publications/coredp/coredp2006.html (text/html)

Related works:
Journal Article: Networks of Free Trade Agreements among Heterogeneous Countries (2010)
Working Paper: Networks of free trade agreements among heterogeneous countries (2010)
Working Paper: Networks for Free Trade Agreements among Heterogeneous Countries (2006)
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:cor:louvco:2006053

Access Statistics for this paper

More papers in LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Alain GILLIS ().