IDEAS home Printed from https://ideas.repec.org/a/tpr/asiaec/v15y2016i3p142-164.html
   My bibliography  Save this article

Gains from Trade Liberalization between Heterogeneous Countries: Implications for the Korea–Japan FTA

Author

Listed:
  • Gihoon Hong

    (Pusan National University)

  • Soo Hyun Oh

    (Korea Institute for International Economic Policy)

Abstract

We study the welfare implications of a bilateral free trade agreement (FTA). The model is based on the recent trade literature that considers search and matching frictions in the labor market. We extend the model by incorporating country-level heterogeneity in terms of production technology, population, and productivity endowment. By calibrating the model to Japanese and Korean data in order to assess the expected outcome of the potential Korea–Japan FTA, we find that when the two countries have the same population size, Japan receives greater benefits from the FTA because its relatively more capital-intensive production allows for quicker output adjustment upon trade liberalization. When we take into account that Japan's population is 2.5 times that of Korea, however, the results show that Korea enjoys a greater surplus because of the market size effect.

Suggested Citation

  • Gihoon Hong & Soo Hyun Oh, 2016. "Gains from Trade Liberalization between Heterogeneous Countries: Implications for the Korea–Japan FTA," Asian Economic Papers, MIT Press, vol. 15(3), pages 142-164, Fall.
    • Handle: RePEc:tpr:asiaec:v:15:y:2016:i:3:p:142-164
    as

    Download full text from publisher

    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/ASEP_a_00463
    File Function: link to full text pdf
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:asiaec:v:15:y:2016:i:3:p:142-164. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kelly McDougall (email available below). General contact details of provider: https://direct.mit.edu/journals .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.