Trading Blocs and Welfare: How Trading Bloc Members are Affected by New Entrants

25 Pages Posted: 15 Feb 2006

See all articles by R. Scott Hacker

R. Scott Hacker

affiliation not provided to SSRN

Qaizar Hussain

International Monetary Fund (IMF)

Date Written: June 1998

Abstract

This paper uses the three-country duopoly model to examine the effects of lowered trade barriers when a new entrant joins a trading bloc. There are two firmsa small-country firm and a large-country firm within the blocand three marketstwo within and one (new entrant`s) outside the bloc. The analysis generally shows greater gains for the small-country than for the large-country firm. The small-country firm will export more to the external country than the large-country firm. But if tariffs decline, the export share of the large-country firm will increase relative to the small-country firm`s, though profits will improve more for the latter.

Keywords: Trading Blocs, Duopoly, Tariffs

JEL Classification: F15, F10, D43, D60

Suggested Citation

Hacker, R. Scott and Hussain, Qaizar, Trading Blocs and Welfare: How Trading Bloc Members are Affected by New Entrants (June 1998). IMF Working Paper No. 98/84, Available at SSRN: https://ssrn.com/abstract=882589

R. Scott Hacker (Contact Author)

affiliation not provided to SSRN

No Address Available

Qaizar Hussain

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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