Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/211521 
Year of Publication: 
1988
Series/Report no.: 
Bank of Finland Discussion Papers No. 18/1988
Publisher: 
Bank of Finland, Helsinki
Abstract: 
It is shown that the Dixit-Norman argument for the creation of an optimal customs union without lump sum transfers presupposes either that there exists a joint fiscal authority in the union or that lump sum transfers between national governments are possible. A necessary and sufficient condition for the decentralized implementation of the optimal union is derived. This condition is related to the old discussion of trade creation vs. trade diversion. The other contribution of the paper is to extend the Dixit-Norman argument to customs unions with factor mobility i.e. to common markets.
Persistent Identifier of the first edition: 
ISBN: 
951-686-164-4
Document Type: 
Working Paper

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