Size Does Matter: International Trade and Population Size

22 Pages Posted: 13 Sep 2004

See all articles by Yochanan Shachmurove

Yochanan Shachmurove

City University of New York, CUNY City College of New York - Department of Economics; The University of Pennsylvania - Department of Economics

Uriel Spiegel

Bar-Ilan University - Department of Management

Date Written: July 2004

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.

Keywords: Duopoly, Free Trade, Protectionism, Population Size, Nash Equilibrium

JEL Classification: D4, F1, L1

Suggested Citation

Shachmurove, Yochanan and Spiegel, Uriel, Size Does Matter: International Trade and Population Size (July 2004). PIER Working Paper No. 04-035. Available at SSRN: https://ssrn.com/abstract=590242 or http://dx.doi.org/10.2139/ssrn.590242

Yochanan Shachmurove (Contact Author)

City University of New York, CUNY City College of New York - Department of Economics ( email )

160 Convent Avenue
New York, NY 10031
United States
212-650-6202 (Phone)

The University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-1090 (Phone)
215-573-2057 (Fax)

Uriel Spiegel

Bar-Ilan University - Department of Management ( email )

Ramat-Gan, 52900
Israel
011-972-3-5318282 (Phone)
+972.3.535.3329 (Fax)

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