Understanding the Welfare Implications of Preferential Trade Agreements

  title={Understanding the Welfare Implications of Preferential Trade Agreements},
  author={M. Ayhan Kose and Raymond Riezman},
AbstractThis paper examines various implications of preferential trade agreements, namely customs unions and free trade areas, in the context of a multicountry general equilibrium model. The model is calibrated to represent countries with symmetric endowments, and aggregate and disaggregate welfare change measures are used to quantify the welfare effects of preferential trade agreements. It is found that free trade areas are better than customs unions on welfare grounds for the world as a whole… CONTINUE READING

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