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Trade preferences and political equilibrium associated with trade liberalization.
- Source :
-
Journal of International Trade & Economic Development . Apr2017, Vol. 26 Issue 3, p361-384. 24p. - Publication Year :
- 2017
-
Abstract
- This paper, motivated by the so-called North–South problem in trade, analyzesex antetrade preferences and the source of potential political conflicts regarding trade liberalization. Developing a dynamic extension of the traditional Heckscher–Ohlin model with imperfect labor mobility and tracking overall dynamic paths from the autarky to free-trade steady states, we demonstrate that in the presence of inter-sectoral migration barrier, bilateral free-trade agreements can be welcomed (opposed) by the majority of workers in a capital-abundant (labor-abundant) country, which is inconsistent with the welfare prediction by Stolper and Samuelson. This paper also proposes a numerical algorithm to solve for the entire transition path of the model under rational expectation. Our simulation experiments further reveal that preannounced and delayed implementation can facilitate a bilateral free-trade agreement by partially neutralizing short-run transitional gains and losses so as to persuade the losers to support the reform without affecting the beneficiaries’ trade preferences. [ABSTRACT FROM PUBLISHER]
Details
- Language :
- English
- ISSN :
- 09638199
- Volume :
- 26
- Issue :
- 3
- Database :
- Academic Search Index
- Journal :
- Journal of International Trade & Economic Development
- Publication Type :
- Academic Journal
- Accession number :
- 120967740
- Full Text :
- https://doi.org/10.1080/09638199.2016.1252417