On zero and asymmetric trade flows

Toshihiro Okubo, Pierre Picard and Jacques Thisse

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: In this paper we study how the trade costs and the intensity of competition can explain the existence of bilateral trade, unilateral trade and no trade within an industry. We show as trade costs decrease from very high to very low values, the global economy moves from autarky to a regime of bilateral trade, through a regime of unilateral trade from the larger to the smaller country. Bilateral or unilateral trade is less likely when the global economy gets more competitive. Finally, the market delivers an outcome in which capital is too much concentrated in the larger 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
New Economics Papers: this item is included in nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:10-08

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