| Abstract |
In this paper we present a one-sector Dixit-Stiglitz-Krugman model of\n North-South trade, in order to evaluate the welfare and convergence\n implications of a gradual, bilateral trade liberalization. Using the\n same formal setting that generated the "new trade theory" wave, we show\n that a poorer and technologically disadvantaged South may diverge in\n welfare terms with the North, provided that its population and market\n size were large enough. Both regional blocks are shown to benefit from\n freer trade in absolute terms. |
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