General Trading Costs in Pure Theory of International Trade
نویسندگان
چکیده
We use the HOS model of international trade to find a link between trading costs and pattern of trade, not just its effect on volume of trade. We prove that higher trading costs in labor-abundant countries will restrict volume of world trade by working against factor endowment bias and conversely for the capital-abundant nation. Asymmetric trading cost between goods may have paradoxical output effects. Relatively capital-abundant country will be worse off with increasing trading cost at home and abroad, whereas laborabundant country may gain from further increase in trading cost relative to autarky.
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