——————————————————————————————————— We study optimal portfolio choice in a two-country model where assets represent claims on future consumption and facilitate trade in markets with imperfect credit. Assuming that foreign assets trade at a cost, agents hold relatively more domestic assets. Consequently, agents have larger claims to domestic over foreign consumption. Moreover, foreign assets tur...

This paper investigates the link between domestic income inequality and international trade using a dynamic model of occupational choice. After showing how systematic patterns of comparative advantage arise among countries with no di®erences in their economic fundamentals, I provide two results regarding trade liberalization describing the full transition dynamics. First, international income d...

Picture a small open economy in the North Atlantic Ocean, highly dependent on trade with the EU and NAFTA. How important are these trading blocs to the country’s exports? How important is the country’s location and size, and how do these affect the export sectors? A unique version of the gravity model is applied here using an inverse hyperbolic sine function. Typically, the export volume is sig...

Mercosur has achieved important advances like the removal of intrabloc tariff and non-tariff barriers and the establishment of a common external tariff for most products. However, its ambitious plans to deepen the integration process comprising harmonisation of policies in areas like competition policy, government procurement, technical barriers and phytosanitary measures have not been implemen...

Using a simple monopoly model, we examine the effects of economic integration. We show that the number of markets and the shape of marginal revenue curves are crucial to evaluate economic integration when the marginal cost is not constant. The effects of tariff-reductions in a three-country model are in contrast with those in a two-country model. The effects also depend on what trade policy the...

Economic integration is examined in a multi-economy Schumpeterian growth model where economies differ in their research environment, and consequently in the productivity of R&D. We show that economies with more or less the same productivity of R&D integrate. In equilibrium, there can be many common markets with different growth rates as well as stagnating economies with decreasing relative inco...

A country’s suitability for entry into a currency union depends on a number of economic conditions. These include, inter alia, the intensity of trade with other potential members of the currency union, and the extent to which domestic business cycles are correlated with those of the other countries. But international trade patterns and international business cycle correlations are endogenous. T...

We show that whether trade is one-way or two-way depends on wage strategies adopted by trade unions. The union’s wage strategy choices themselves depend upon the conditions under which trade takes place, as well as upon the characteristics of both the labour and the product markets in the trading countries. The impact of economic integration on union choices and therefore upon both labour marke...