North–South Trade Liberalization and Economic Welfare

12 Pages Posted: 7 Oct 2015

See all articles by John Gilbert

John Gilbert

Utah State University - College of Business - Department of Economics

Hamid Beladi

University of Texas at San Antonio - College of Business - Department of Economics

Reza Oladi

Utah State University - College of Business - Department of Economics

Date Written: November 2015

Abstract

We consider a general equilibrium model of a developing economy (the South) that opens to trade with a developed economy (the North). The southern economy is characterized by open urban unemployment and rural–urban migration, a competitive agricultural sector and a monopolistically competitive manufacturing sector. Hence, there is potential for both inter‐ and intra‐industry trade to arise on liberalization, in addition to distortionary effects of duality. Southern comparative advantage in agriculture may arise from the labor market distortion and the basis for intra‐industry trade is love for variety. We characterize various configurations of the trade pattern, and the resulting welfare consequences of opening to trade in this context. We illustrate a new mechanism under which in some circumstances it may be possible for trade liberalization to lower economic welfare in the South.

Suggested Citation

Gilbert, John and Beladi, Hamid and Oladi, Reza, North–South Trade Liberalization and Economic Welfare (November 2015). Review of Development Economics, Vol. 19, Issue 4, pp. 1006-1017, 2015. Available at SSRN: https://ssrn.com/abstract=2670320 or http://dx.doi.org/10.1111/rode.12182

John Gilbert (Contact Author)

Utah State University - College of Business - Department of Economics ( email )

3530 Old Main Hill
Logan, UT 84322-3530
United States
435-797-2314 (Phone)
435-797-2701 (Fax)

Hamid Beladi

University of Texas at San Antonio - College of Business - Department of Economics ( email )

One UTSA Circle
P.O. Box 5636
San Antonio, TX 78249
United States
210-458-7038 (Phone)
210-458-7040 (Fax)

Reza Oladi

Utah State University - College of Business - Department of Economics ( email )

3530 Old Main Hill
Logan, UT 84322-3530
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
0
Abstract Views
97
PlumX Metrics