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Trade liberalisation and regional integration: the search for large numbers[Note 1. This paper is based on an Invited Paper presented ...]
Author(s) -
Robinson Sherman,
Thierfelder Karen
Publication year - 2002
Publication title -
australian journal of agricultural and resource economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.683
H-Index - 49
eISSN - 1467-8489
pISSN - 1364-985X
DOI - 10.1111/1467-8489.t01-1-00057
Subject(s) - computable general equilibrium , economics , liberalization , international economics , imperfect competition , welfare , productivity , free trade , capital (architecture) , competition (biology) , international trade , regional integration , economic integration , trade diversion , international free trade agreement , macroeconomics , microeconomics , market economy , history , ecology , archaeology , biology
We surveyed the empirical literature using multi–country computable general equilibrium (CGE) models to analyse potential and actual regional trade agreements (RTAs). The studies indicate that these RTAs improve welfare, that trade creation greatly exceeds trade diversion, and that they are consistent with further global liberalisation. The welfare gains are bigger when models incorporate aspects of “new trade theory” such as increasing returns, imperfect competition, and links between trade liberalisation, total factor productivity growth, and capital accumulation. We also conjectured that an RTA expands market size and stability, allowing firms to pursue economies of fine specialisation, generating additional “Smithian” efficiency gains.