DP2535 | Preferential Trade Arrangements, Induced Investment, and National Income in a Heckscher-Ohlin-Ramsey Model

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29/08/2000

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Abstract

We develop a Heckscher-Ohlin-Ramsey model, combining dual techniques with classic geometric techniques from trade theory. This framework is used to explore the long-run general equilibrium effects of regional integration (preferential trade agreements). Emphasis is placed on positive mechanics related to adjustment in the capital stock, long-run changes in the pattern in trade, and the implications for changes in long-run (steady-state) national income. The importance of relative country size and the dynamic implications for third countries are also addressed.