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Title:Reciprocity, world prices and welfare PDF Logo
Authors:Raimondos-Møller, Pascalis
Woodland, Alan D.
Issue Date:2011
Series/Report no.:CESifo working paper: Trade Policy 3607
Abstract:We examine in detail the circumstances under which reciprocity, as defined in Bagwell and Staiger (1999), leads to fixed world prices. We show that a change of tariffs satisfying reciprocity does not necessarily imply constant world prices in a world of many goods and countries. While it is possible to find tariff reforms that are consistent with both reciprocity and constant world prices, these reforms do not follow from the reciprocity condition, but rather from the requirement of unchanged world prices. We propose an alternative reciprocity rule that is guaranteed to raise the welfare of all countries, independently of whether world prices change and independently of the relative numbers of goods and countries.
Subjects:GATT
reciprocity
fixed world prices
JEL:F02
F13
F15
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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