Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/237991 
Year of Publication: 
2020
Series/Report no.: 
BGPE Discussion Paper No. 200
Publisher: 
Friedrich-Alexander-Universität Erlangen-Nürnberg, Erlangen und Nürnberg
Abstract: 
The entry of a low-wage country into a world economy with pre-existing wage differentials puts the gains from trade in a former low-wage and then medium-wage country under pressure. If negotiations over the formation of a free trade area cover international transfers, there is a strong presumption that they bring about global free trade and compensation of the mediumwage country if necessary. In the absence of international transfers, by contrast, the medium-wage country is not compensated when global free trade causes a reduction in its gains from trade, and it may even happen that it is not part of the equilibrium free trade area.
Subjects: 
gains from trade
low-wage competition
North-South trade
freetrade area
core
equality
JEL: 
F11
F61
Document Type: 
Working Paper

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