Does Preferential Trade Benefit Poor Countries? A General Equilibrium Assessment with Nonhomothetic Preferences

32 Pages Posted: 9 Apr 2015

See all articles by Joachim Stibora

Joachim Stibora

Kingston University - Economics

Albert de Vaal

Radboud University Nijmegen - Department of Economics

Date Written: May 2015

Abstract

We develop a Ricardian model of trade with nonhomothetic preferences to analyze preferential trade agreements (PTAs) among countries of different stages of economic development. The richer a country is, the more likely will PTAs improve its terms of trade, also when it is a non‐member. Rich non‐member countries are also less likely to incur welfare losses from PTAs. PTA membership only guarantees welfare gains for countries that are too poor to import the goods rich countries produce. For all other countries, the welfare effects of joining PTAs depend on the world income distribution and on the strength of comparative advantages.

Suggested Citation

Stibora, Joachim and de Vaal, Albert, Does Preferential Trade Benefit Poor Countries? A General Equilibrium Assessment with Nonhomothetic Preferences (May 2015). Review of International Economics, Vol. 23, Issue 2, pp. 239-270, 2015. Available at SSRN: https://ssrn.com/abstract=2592233 or http://dx.doi.org/10.1111/roie.12170

Joachim Stibora (Contact Author)

Kingston University - Economics

United States

Albert De Vaal

Radboud University Nijmegen - Department of Economics ( email )

Nijmegen, 6500 HK
Netherlands

Register to save articles to
your library

Register

Paper statistics

Downloads
0
Abstract Views
113
PlumX Metrics