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On zero and asymmetric trade flows

Author

Listed:
  • Toshihiro Okubo

    (Kobe University)

  • Pierre M. Picard

    (CREA, University of Luxembourg)

  • Jacques-François Thisse

    (CREA, University of Luxembourg; Université Catholique de Louvain; CEPR)

Abstract

In this paper we study how the trade costs and the intensity of competition can explain the existence of bilateral trade, unilateral trade and no trade within an industry. We show as trade costs decrease from very high to very low values, the global economy moves from autarky to a regime of bilateral trade, through a regime of unilateral trade from the larger to the smaller country. Bilateral or unilateral trade is less likely when the global economy gets more competitive. Finally, the market delivers an outcome in which capital is too much concentrated in the larger country.

Suggested Citation

  • Toshihiro Okubo & Pierre M. Picard & Jacques-François Thisse, 2010. "On zero and asymmetric trade flows," DEM Discussion Paper Series 10-08, Department of Economics at the University of Luxembourg.
    • Handle: RePEc:luc:wpaper:10-08
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    File URL: http://wwwfr.uni.lu/content/download/28785/339998/file/2010_08-On%20zero%20and%20asymmetric%20trade%20flows.pdf
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    Citations

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    Cited by:

    1. Picard, P.M., 2015. "Trade, economic geography and the choice of product quality," Regional Science and Urban Economics, Elsevier, vol. 54(C), pages 18-27.

    More about this item

    Keywords

    trade regime; country asymmetry; capital mobility;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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