In this article, the authors demonstrate the possibility of price equalization in a two-country world with barriers to international trade. For price equalization to occur when the countries are asymmetric, the country with higher productivity must also be the one with the lower trade barrier. A...

This paper analyses the effects of tariff reforms on welfare and market access in a competitive small open economy that is characterised by involuntary unemployment due to non-market clearing wages that are fixed either in terms of the numeraire or in real terms. We show that recent...

Standard trade theory suggests indifference between free trade and free migration as both lead to factor price equalization. Rich countries, however, prefer free trade to free migration. This inconsistency can be explained by incorporating the impact of social capital. The movement of people...

With reference to the size of the informal sector, Stiglitz (2003) argues that border taxes are superior to VAT in certain developing countries. By way of a quantitative example this paper shows that, while Stiglitz' claim is probably will turn out to be correct, a large informal sector is not a...

This paper examines theoretically the structure of optimal (Nash equilibrium) tariff rates under retaliation in a two-country economy with more than two traded goods. We provide a condition under which the equilibrium tariff rates become uniform in both countries, and explore the ranking of the...

This paper determines the distributional effects of international outsourcing in a two sector Heckscher-Ohlin type model. It is shown that the factor-biased and the sector-biased impact of international outsourcing discussed in the literature can be seen as special cases of the more general...

This paper shows how gains from trade are conditioned by love of variety, defined as the extent to which an additional product variety generates benefits in either final or intermediate consumption. We develop a multi-country, multi-sector gravity trade model where love of variety is...

We illustrate a new source of comparative advantage that is generated by countries' different ability to adjust to technological change. Our model introduces substitution of workers in codifiable (routine) tasks with more efficient machines, a process extensively documented in the labor...

We illustrate a new source of comparative advantage that is generated by countries’ different ability to adjust to technological change. Our model introduces substitution of workers in codifiable (routine) tasks with more efficient machines, a process extensively documented in the labor...

This volume was prepared by Sebastian Benz while he was working at the Ifo Institute. It was completed in December 2013 and accepted as a doctoral thesis by the Department of Economics at the University of Munich. It includes five self-contained chapters. All chapters discuss different...