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Size Does Matter: International Trade and Population SizeYochanan ShachmuroveThe City College of The City University of New York - Department of Economics; The University of Pennsylvania - Department of Economics Uriel SpiegelBar Ilan University - Department of Economics July 2004 PIER Working Paper No. 04-035 Abstract: Classical theory of international trade has long advocated trade liberalization and open borders. However, this process is not necessarily beneficial to all countries involved. This paper focuses on two modeled economies that initially share the same technology and per-capita income, but differ in population size. With trade, the profit of the large duopolist is reduced to the benefit of the duopoly in the smaller country, as the large country is no longer able to benefit from its larger population. This may explain why one country would want to open trade with high barriers while another country would prefer low barriers.
Number of Pages in PDF File: 22 Keywords: Duopoly, Free Trade, Protectionism, Population Size, Nash Equilibrium JEL Classification: D4, F1, L1 working papers seriesDate posted: September 13, 2004Suggested CitationContact Information
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