In the paper, we show how the potential signaling properties of trade agreements can explain two notable features of the international trading system. First, many trade agreements involve gradual, rather than immediate, reduction of trade barriers. We demonstrate how gradualism can serve as a...

In this paper the role of information asymmetries between regions and a centralized authority is analyzed. In a model with inter-regional externalities due to capital mobility and a source-based tax instrument, we first derive conditions for which the optimum can be implemented by an adequately...