Tariff diversity and FTA network

Jihwan DO; Jung HUR; Sung-Ha HWANG; Larry D. QIU

doi:10.1007/s10290-022-00469-y

Tariff diversity and FTA network

Jihwan DO, Jung HUR^*, Sung-Ha HWANG, Larry D. QIU

^*Corresponding author for this work

Department of Economics

Research output: Journal Publications › Journal Article (refereed) › peer-review

1 Citation (Scopus)

Abstract

The number of free trade agreements (FTAs) has increased in the past few decades, and the cross-country variation of the most-favored-nation (MFN) tariffs has decreased. Motivated by these two facts, we study whether the reduced variance in cross-country MFN tariffs can help explain the expansion of FTAs. Using an oligopolistic trade model with the equilibrium concept of pairwise stable networks, we reveal the existence of a set of pairwise stable network equilibria, where the number of FTAs rises as tariffs become increasingly symmetrical. This finding contributes to theoretical FTA literature by showing that an incomplete FTA network can be supported as a pairwise stable network equilibrium.

Original language	English
Pages (from-to)	333-360
Number of pages	28
Journal	Review of World Economics
Volume	159
Issue number	2
Early online date	17 May 2022
DOIs	https://doi.org/10.1007/s10290-022-00469-y
Publication status	Published - May 2023

Bibliographical note

Funding Information:
We appreciate the comments of two anonymous referees. This project is financially supported by RGC Competitive Earmarked Research Grant 2012–2014 (No. HKU751812B) of the HKSAR Government.

Publisher Copyright:
© 2022, The Author(s) under exclusive licence to Kiel Institute for the World Economy.

Keywords

Free trade agreements
Pairwise stable networks
Tariffs

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1007/s10290-022-00469-y

https://link.springer.com/10.1007/s10290-022-00469-y

Cite this

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abstract = "The number of free trade agreements (FTAs) has increased in the past few decades, and the cross-country variation of the most-favored-nation (MFN) tariffs has decreased. Motivated by these two facts, we study whether the reduced variance in cross-country MFN tariffs can help explain the expansion of FTAs. Using an oligopolistic trade model with the equilibrium concept of pairwise stable networks, we reveal the existence of a set of pairwise stable network equilibria, where the number of FTAs rises as tariffs become increasingly symmetrical. This finding contributes to theoretical FTA literature by showing that an incomplete FTA network can be supported as a pairwise stable network equilibrium.",

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N2 - The number of free trade agreements (FTAs) has increased in the past few decades, and the cross-country variation of the most-favored-nation (MFN) tariffs has decreased. Motivated by these two facts, we study whether the reduced variance in cross-country MFN tariffs can help explain the expansion of FTAs. Using an oligopolistic trade model with the equilibrium concept of pairwise stable networks, we reveal the existence of a set of pairwise stable network equilibria, where the number of FTAs rises as tariffs become increasingly symmetrical. This finding contributes to theoretical FTA literature by showing that an incomplete FTA network can be supported as a pairwise stable network equilibrium.

AB - The number of free trade agreements (FTAs) has increased in the past few decades, and the cross-country variation of the most-favored-nation (MFN) tariffs has decreased. Motivated by these two facts, we study whether the reduced variance in cross-country MFN tariffs can help explain the expansion of FTAs. Using an oligopolistic trade model with the equilibrium concept of pairwise stable networks, we reveal the existence of a set of pairwise stable network equilibria, where the number of FTAs rises as tariffs become increasingly symmetrical. This finding contributes to theoretical FTA literature by showing that an incomplete FTA network can be supported as a pairwise stable network equilibrium.

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Tariff diversity and FTA network

Abstract

Bibliographical note

Keywords

UN SDGs

Access to Document

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