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Regionalism or Multilateralism? A Political Economy Choice

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  • Ms. Giorgia Albertin

Abstract

This paper provides a political economy analysis of the incentives underpinning a country's decision to enter a regional trade agreement when a multilateral free trade agreement is available, and of how entering a regional trade agreement affects the incentives to pursue multilateral trade liberalization. Taking into account the influence exerted by organized interest groups in the formation of trade agreements, we derive a formal condition under which a regional trade agreement is preferred to a multilateral one. Furthermore, we show that a country's decision to enter a regional trade agreement unambiguously undermines the incentives towards multilateral trade liberalization.

Suggested Citation

  • Ms. Giorgia Albertin, 2008. "Regionalism or Multilateralism? A Political Economy Choice," IMF Working Papers 2008/065, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2008/065
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    Keywords

    WP; free trade; interest group;
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