Hub and spoke bilateralism and the global income distribution

Joachim Stibora (j.stibora@kingston.ac.uk) and Albert de Vaal (a.devaal@fm.ru.nl)
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Joachim Stibora: Kingston University London
Albert de Vaal: Radboud University Nijmegen, Postal: Nijmegen School of Management, Department of Economics, Radboud University Nijmegen, The, Netherlands. ,

No 2006-7, Economics Discussion Papers from School of Economics, Kingston University London

Abstract: We study the effects of hub and spoke liberalization in a model where income matters for consumption patterns. We use a three-country Ricardian trade model in which goods are ranked according to priority and where economies differ in their income level. The poorest (richest) country has a comparative advantage in the production of lowest-ranked (highest-ranked) goods, specializing in goods with low (high) income elasticities in demand. The medium rich country specializes in the production of the intermediate-ranked commodities. We find that a country’s income level is of decisive importance for assessing the impact of hub and spoke arrangements on welfare. Hubs do not necessarily gain and spokes do not necessarily lose.

Keywords: Ricardian trade model; asymmetric demand complementarities; nonho- mothetic preferences; global income distribution. (search for similar items in EconPapers)
JEL-codes: F10 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2006-09-01
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Persistent link: https://EconPapers.repec.org/RePEc:ris:kngedp:2006_007

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