Trade Agreements and the Nature of Price Determination
Year: 2012
Type: article
Abstract: According to the terms-of-trade theory, negotiations over tariffs alone, coupled with an effective market access preservation rule, can bring governments to the efficiency frontier. In this paper, we show that the nature of international price determination is important for this central result of the terms-of-trade theory. While the received theory assumes that international prices are fully disciplined by aggregate market clearing conditions, we show here that support for “shallow” integration is overturned, and instead a need for “deep” integration is suggested ? wherein direct negotiations occur over both border and behind-the-border policies ? if international prices are determined through bargaining.
Source: American Economic Review
Authors: Pol Antràs, Robert W Staiger
Institutions: Harvard University, University of Wisconsin–Madison
Language: English
Topic: Global trade and economics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2129100411