The Gains from Fiscal Cooperation in the Two Commodity Real Trade Model

Stephen J Turnovsky

No 2466, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper analyzes the gains from fiscal cooperation within the context of the standard two commodity real trade model. It shows how the adjustment in terms of trade is the critical factor in determining the effects of moving from a noncooperative equilibrium. In general, a noncooperative equilibrium leads to an overexpansion of government expenditure on the export good and an underexpansion on the import good, relative to a cooperative equilibrium. The specific example of a logarithmic economy is also considered. The paper discusses further the welfare effects resulting from the formation of a coalition among two countries.

Date: 1987-12
Note: ITI IFM
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Published as Turnovsky, Stephen J. "The Gains from Fiscal Cooperation in the Two Commodity Real Trade Model," Journal of International Economics, Vol. 25, 1988.

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Journal Article: The gains from fiscal cooperation in the two-commodity real trade model (1988)
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