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Size Does Matter: International Trade and Population Size

Author

Listed:
  • Yochanan Shachmurove

    (The City College of The City University of New York and the University of Pennsylvania)

  • Uriel Spiegel

    (Department of Economics, Bar Ilan University)

Abstract

Classical theory of international trade has long advocated trade liberalization and open borders. However, this process is not necessarily beneficial to all countries involved. This paper focuses on two modeled economies that initially share the same technology and per-capita income, but differ in population size. With trade, the profit of the large duopolist is reduced to the benefit of the duopoly in the smaller country, as the large country is no longer able to benefit from its larger population. This may explain why one country would want to open trade with high barriers while another country would prefer low barriers.

Suggested Citation

  • Yochanan Shachmurove & Uriel Spiegel, 2004. "Size Does Matter: International Trade and Population Size," PIER Working Paper Archive 04-035, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    • Handle: RePEc:pen:papers:04-035
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Duopoly; Free Trade; Protectionism; Population Size; Nash Equilibrium;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • F1 - International Economics - - Trade
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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