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A Ricardian Model with Endogenous Comparative Advantage and Endogenous Trade Policy Regimes

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  • WEN LI CHENG
  • MENG‐CHUN LIU
  • XIAOKAI YANG

Abstract

This paper develops a Ricardian model with transaction costs and endogenous and exogenous comparative advantages. It shows that the level of division of labour and trade increases as transaction conditions improve. It identifies the conditions for trade negotiations that result in zero tariff rates and the conditions for the coexistence of unilateral tariff protection and unilateral laissez faire policies. The model may explain the policy transformation of some European governments from Mercantilism to laissez faire in the 18th and 19th century and policy changes in developing countries from protection tariff to trade liberalization and tariff negotiation.

Suggested Citation

  • Wen Li Cheng & Meng‐Chun Liu & Xiaokai Yang, 2000. "A Ricardian Model with Endogenous Comparative Advantage and Endogenous Trade Policy Regimes," The Economic Record, The Economic Society of Australia, vol. 76(233), pages 172-182, June.
    • Handle: RePEc:bla:ecorec:v:76:y:2000:i:233:p:172-182
    DOI: 10.1111/j.1475-4932.2000.tb00015.x
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    Cited by:

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    2. Xueping Jiang & Jen-Mei Chang & Hui Sun, 2019. "Inframarginal Model Analysis of the Evolution of Agricultural Division of Labor," Mathematics, MDPI, vol. 7(12), pages 1-14, December.
    3. Hazel Parcon, 2008. "Disaggregating PTAs at the Role of International Division of Labor on PTA Formation," Working Papers 200806, University of Hawaii at Manoa, Department of Economics.
    4. Cheng, Wenli & Yang, Xiaokai, 2004. "Inframarginal analysis of division of labor: A survey," Journal of Economic Behavior & Organization, Elsevier, vol. 55(2), pages 137-174, October.

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    More about this item

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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