The heterogeneous effects of trade on asymmetric countries

Abstract : In order to investigate the effects of trade on asymmetric countries, we build a simple two-country Melitz model with cross-country efficiency differences and market size variations. We also introduce a public good financed by tax revenues. We find that free trade makes the more efficient country produce more and alleviate the fiscal burden on its economy. The effects are completely opposite for the other country. Furthermore, we show that when the relative size of the technologically advanced country is large enough, we assist to an agglomeration of resources in this country. The main contribution of this paper is to prove that the more asymmetric the countries are, the more heterogeneous is the impact of trade on their respective GDP, aggregate profits and tax rate.
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Economies and finances. 2015
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Soumis le : vendredi 29 juillet 2016 - 12:28:24
Dernière modification le : vendredi 29 septembre 2017 - 22:59:57
Document(s) archivé(s) le : dimanche 30 octobre 2016 - 12:04:47


  • HAL Id : dumas-01349915, version 1


Badis Tabarki. The heterogeneous effects of trade on asymmetric countries. Economies and finances. 2015. 〈dumas-01349915〉



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