CRISTOBAL CAMPOAMOR, ADOLFO
No
Econ. Bull.
Article
Científica
0.203
01/01/2019
000504882300051
In this paper we present a one-sector Dixit-Stiglitz-Krugman model of North-South trade, in order to evaluate the welfare and convergence implications of a gradual, bilateral trade liberalization. Using the same formal setting that generated the "new trade theory" wave, we show that a poorer and technologically disadvantaged South may diverge in welfare terms with the North, provided that its population and market size were large enough. Both regional blocks are shown to benefit from freer trade in absolute terms.