We consider trade between a flexible wage America and a rigid real wage Europe. In a benchmark case, a move from autarky to free trade doubles the European unemployment rate, while it raises the American unskilled wage to the high European level. Entry of the unskilled South to world markets...

This paper reviews the most significant recent developments in the theory of trade agreements. The paper offers an integrated approach to evaluating trade agreements, and uses the approach to present results on preferential and multilateral trade agreements. The paper identifies also several...

This article argues that the terms-of-trade and volume-of-trade taxonomy from the theory of tariffs constitutes an attractive alternative to Viner's trade diversion and creation effects for the analysis of preferential trading arrangements. In applications of the alternative approach, the...