No trade, one-way or two-way trade?

Jacques Thisse, Pierre Picard and Toshihiro Okubo

No 8161, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study how the level of trade costs and the intensity of competition can explain the existence of two-way, one-way or no trade within the same industry. As trade costs decrease from very high to very low values, the economy moves from autarky to a regime of two-way trade, through a regime of one-way trade from the larger to the smaller country. Trade is less likely when the economy gets more competitive. Finally once capital is mobile across countries, the market delivers an outcome in which capital is too much concentrated in the large country.

Keywords: Trade regime; Country asymmetry; Capital mobility (search for similar items in EconPapers)
JEL-codes: F12 H22 H87 R12 (search for similar items in EconPapers)
Date: 2010-12
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Working Paper: No trade, one-way or two-way trade? (2011)
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