Do negotiated tariffs under the WTO deviate significantly from the first-best agreement? If so, why? To answer these questions, we consider two potential causes of deviation from the first-best in WTO negotiations: (i) a free-riding problem that may be caused by the WTO's nondiscrimination...

Economic interdependence of heterogeneous habit forming consumers is examined by using a two-country model. Due to endogenous interest rate adjustments, consumption-habit dynamics in one country are affected by the other country's habits and preferences. To characterize the interactive dynamics,...

The closed economy neoclassical model predicts lung-run convergence in per-capita income. We show, within a neoclassical framework, that international trade among two countries differing only in their initial capital endowment generates long-run income differences. Our results suggests that...