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On the possibility of a perverse effect of intra-industry trade

Published online by Cambridge University Press:  17 August 2016

Tito Cordella*
Affiliation:
CORE, Université Catholique de Louvain and Universitat Pompeu Fabra, Barcelona
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Summary

One of the most usual claims in the debate on economic Integration is that trade liberalization and a fortiori free trade agreements are at the greater advantage of consumers of all countries. In this paper we show that this statement should be temperated if the countries differ considerably with respect to per capita income. If this is the case it can happen that only the consumers of the richest countries gain from the creation of a common market; while, in the poorest countries, the firms gain but the consumers are worse off. The analysis confirms some worries about the short run effects and the distributive problems induced by the economic integration of heterogeneous areas.

Résumé

Résumé

Une des affirmations les plus courrantes dans le débat sur l’intégration économique est que la libéralisation du commerce et à fortiori les accords de libre échange sont avantageux pour tous les consommateurs quelque soit leur pays d’origine. Dans ce papier nous montrons que cette affirmation devrait être relativisée si l’écart entre les revenus par habitant dans les pays considérés est important. Si c’est le cas il se peut que seuls les consommateurs des pays les plus riches et les firmes des pays les plus pauvres gagneraient à la création d’un marché commun. L’analyse confirme une certaine préocupation quant aux effets de court terme et aux effets redistributifs de l’intégration économique de régions hétérogènes.

Keywords

Type
Research Article
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1996 

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Footnotes

(*)

I would like to thank Jean J. Gabszewicz, Isabel Grilo, Enrico Minelli, Massimo Motta, Luigi Ventura and Marie Odille Yanelle for their valuable comments. The usual disclaimer applies. Finantial aid by the EEC Commission (SPES scholarship) is gratefully acknowledged.

References

REFERENCES

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