Endogenous Structure of the Division of Labor, Endogenous Trade Policy Regime, and a Dual Structure in Economic Development

Xiaokai Yang and Dingsheng Zhang

No 11, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics

Abstract: This paper develops a general equilibrium model with transaction costs and endogenous and exogenous comparative advantages. The governments are allowed to choose between tariff war, tariff negotiation, and a {\it laissez faire} regime. It shows that the level of the division of labor and trade increases as transaction conditions improve. When a high level of the division of labor occurs in general equilibrium, all countries prefer Nash tariff bargaining game that would result in multilateral free trade. If a medium level of the division of labor occurs in general equilibrium, then unilateral protection tariff in a less developed country and unilateral {\it laissez faire} policies in a developed country would coexist. The results show that tariff negotiations are essential for achieving multilateral free trade. In addition, the model may explain the policy transition of some European governments from mercantilism to free-trade regime in the 18th and 19th century and policy changes in developing countries from protection tariff to tariff negotiation and trade liberalization.

Keywords: Endogenous structure of the division of labor; Dual economy; Endogenous trade policy regime (search for similar items in EconPapers)
JEL-codes: D30 F10 O10 (search for similar items in EconPapers)
Pages: 20 pages
Date: 1999-05, Revised 2000-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Annals of Economics and Finance, May 2000, pages 211-230

Downloads: (external link)
http://down.aefweb.net/WorkingPapers/w11.pdf (application/pdf)

Related works:
Chapter: ENDOGENOUS STRUCTURE OF THE DIVISION OF LABOR, ENDOGENOUS TRADE POLICY REGIME, AND A DUAL STRUCTURE IN ECONOMIC DEVELOPMENT (2005)
Journal Article: Endogenous Structure of the Division of Labor, Endogenous Trade Policy Regime, and a Dual Structure in Economic Development (2000)
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:cuf:wpaper:11

Access Statistics for this paper

More papers in CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics Contact information at EDIRC.
Bibliographic data for series maintained by Qiang Gao ().