Reference : No trade, one-way or two-way trade?
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Business & economic sciences : International economics
No trade, one-way or two-way trade?
Okubo, Toshihiro [> >]
Picard, Pierre M. mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
Thisse, Jacques-François [> >]
Research Institute for Economics & Business Administration, Kobe University.
Discussion Paper Series DP2011-14
[en] Trade regime ; country asymmetry ; capital mobility
[en] We study how the level of trade costs and the intensity of competition can explain the existence of two-way, one-way or no trade within the same industry. As trade costs decrease from very high to very low values, the economy moves from autarky to a regime of two-way trade, through a regime of one-way trade from the larger to the smaller country. Trade is less likely when the economy gets more competitive. Finally once capital is mobile across countries, the market delivers an outcome in which capital is too much concentrated in the large country.
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