[en] 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.
Disciplines :
Microeconomics
Author, co-author :
Okubo, Toshihiro
PICARD, Pierre M. ; University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA)
Thisse, Jacques-François
Language :
English
Title :
On zero and asymmetric trade flows
Publication date :
2010
Publisher :
Center for Research in Economic Analysis, University of Luxembourg
