On zero and asymmetric trade flows
Toshihiro Okubo (),
Pierre Picard () and
Jacques Thisse ()
CREA Discussion Paper Series from Center for Research in Economic Analysis, University of Luxembourg
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)
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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:10-08
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