Working Paper: CEPR ID: DP2535
Authors: Joseph Francois; Machiel Rombout
Abstract: We develop a Heckscher-Ohlin-Ramsey model, combining dual techniques with classic geometric techniques from trade theory. This framework is used to explore the long-run general equilibrium effects of regional integration (preferential trade agreements). Emphasis is placed on positive mechanics related to adjustment in the capital stock, long-run changes in the pattern in trade, and the implications for changes in long-run (steady-state) national income. The importance of relative country size and the dynamic implications for third countries are also addressed.
Keywords: Heckscher-Ohlin-Ramsey model; Preferential trade arrangements; Regionalism; Trade and growth; Trade and investment
JEL Codes: F10; F15; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Preferential trade agreements (PTAs) (F13) | induced investment effects (E22) |
| Terms of trade changes (F14) | induced investment effects (E22) |
| Terms of trade changes (F14) | capital stock adjustments (E22) |
| Larger PTA partner (F10) | loss in tariff revenue (H27) |
| Induced capital stock changes (E22) | terms of trade losses (F14) |
| Terms of trade shifts (F14) | investment shifts (F29) |