Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/124322
Authors: 
Soegaard, Christian
Year of Publication: 
2014
Series/Report no.: 
54th Congress of the European Regional Science Association: "Regional development & globalisation: Best practices", 26-29 August 2014, St. Petersburg, Russia
Abstract: 
Why are trade agreements regional? I address this question in a model of oligopoly featuring product variety. Tariffs have the effect of manipulating a country's terms of trade and shifting profits towards the domestic market at the expense of foreign trade partners. Countries endogenously form into regional trade agreements or global free trade in a framework where any agreement must be sustained by repeated interaction. A crucial parameter determining the degree of regionalism is product variety. I demonstrate that for a given trade cost and discount factor, increases in product variety leads to greater scope for global free trade relative to regional trade agreements.
Subjects: 
trade policy
self-enforceability
trade costs
regional trade agreements
JEL: 
F13
F15
Document Type: 
Conference Paper

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