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The Gains from Trade Liberalization

Donald J. Brown and T. Srinivasan
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Donald J. Brown: Yale U

Working Papers from Yale University, Department of Economics

Abstract: We consider trade liberalization in a multilateral trade model, where countries have identical, homothetic tastes but may have different constant returns to scale technologies that produce at least two goods from at least two factors. We introduce the notion of a world equilibrium with transfers and show that Debreu's coefficient of resource utilization or CRU defines a world equilibrium with transfers where all countries are better off in the free trade equilibrium, after trade liberalization, than they were in the distorted world equilibrium. In particular, after trade liberalization, the poor countries of the world are better off in the CRU world equilibrium with transfers than in the free trade world equilibrium without transfers.

JEL-codes: D51 (search for similar items in EconPapers)
Date: 2007-06
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