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Adolfo Cristobal Campoamor
''Trade liberalization by less developed countries with a large market size: meager welfare gains?''
( 2019, Vol. 39 No.2 )
In this paper we present a one-sector Dixit-Stiglitz-Krugman model of North-South trade, in order to evaluate the welfare and convergence implications of a gradual, bilateral trade liberalization. Using the same formal setting that generated the “new trade theory” wave, we show that a poorer and technologically disadvantaged South may diverge in welfare terms with the North, provided that its population and market size were large enough. Both regional blocks are shown to benefit from freer trade in absolute terms.
Keywords: International Trade, North-South Inequality, Welfare Analysis
JEL: F1 - Trade: General
I3 - Welfare and Poverty: General
Manuscript Received : Jan 22 2019 Manuscript Accepted : May 31 2019

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