Asymmetric Country Customs Union Formation

27 Pages Posted: 5 Sep 2009 Last revised: 10 Sep 2009

See all articles by Xin Zhao

Xin Zhao

University of International Business and Economics (UIBE)

Baomin Dong

University of International Business and Economics (UIBE)

Date Written: September 3, 2009

Abstract

Using an N-heterogeneous-country Cournot intra-industry model with three dimensions of heterogeneity considered: i.e., marginal cost of production, market size, and industry concentration, the current paper shows that even under open regionalism regime, in contrast with Yi (1996), global free trade may not be attained via the expansion of customs union. The paper also characterizes the endogenous custom union formation path. When countries are farsightedly rational, customs union can serve as a stepping stone for multilateral liberalization.

Keywords: Customs Union, Free Trade Area, Preferential Trade Agreements

JEL Classification: F14, F15, O24

Suggested Citation

Zhao, Xin and Dong, Baomin, Asymmetric Country Customs Union Formation (September 3, 2009). Available at SSRN: https://ssrn.com/abstract=1467840 or http://dx.doi.org/10.2139/ssrn.1467840

Xin Zhao

University of International Business and Economics (UIBE) ( email )

10, Huixin Dongjie
Changyang District
Beijing, Beijing 100029
China

Baomin Dong (Contact Author)

University of International Business and Economics (UIBE) ( email )

10, Huixin Dongjie
Changyang District
Beijing, Beijing 100029
China

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