Trade and Growth with Heterogeneous Firms and Asymmetric Countries

By Takumi Naito (Vanderbilt University and Waseda University)

Trade liberalization encourages more productive firms to start exporting, while it forces more unproductive firms to exit from their domestic markets. The increase in the average productivity because of tougher selection contributes to higher welfare of countries.… read more ...

Global Tariff Negotiations as a Stumbling Bloc to Global Free Trade?

By James Lake (Southern Methodist University) and Santanu Roy (Southern Methodist University)

The principle of non-discrimination lies at the heart of the WTO. GATT Article I mandates that, for a given product, a country cannot set different tariffs on different trading partners.… read more ...

The GATT/WTO’s Special and Differential Treatment of Developing Countries

By Ben Zissimos (University of Exeter Business School)

Special and differential treatment (SDT) is effectively a set of exemptions from MFN extended to developing country members of the General Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO).… read more ...

Trade Liberalization, Heterogenous Firms and Growth

In static trade models with no market imperfections, the aggregate income and welfare of a small country grow when it opens to trade.  In endogenous growth models, trade liberalization boosts the growth effect generated by non-diminishing returns to factors of production, or learning-by-doing, or knowledge spillovers, or other forms of endogenous technological change.… read more ...

Distributional Consequences of Changes in Relative Prices of Tradeables

Trade policies, price shocks, and changes in exchange rates have a distributional impact whenever they affect the relative price of goods that are consumed at different intensities by high and low-income households. Low-income households consume relatively more tradeables (such as food), while high-income households consume relatively more non-tradeables (such as personal services).… read more ...

The trade-off between tax revenues and trade liberalization

Standard theory predicts that, in the long term, trade liberalization leads to an increase in allocative efficiency and hence an increase of fiscal revenues.  This prediction is based on the idea that overall economic surplus determines the size of the tax base and an improvement in allocative efficiency increases surplus.  Given this attractive feature of trade liberalization, especially from a fiscal standpoint, it is puzzling that developing countries remain relatively protectionist.  A new branch of the literature has begun to shed light on this issue.… read more ...