On the Existence and Characterization of Unequal Exchange in the Free Trade Equilibrium

Authors

Naoki Yoshihara, Department of Economics, University of Massachusetts, AmherstFollow
Soh Kaneko, Faculty of Economics, Keio UniversityFollow

Working Paper Number

2016-04

Publication Date

2016

Abstract

As in Roemer (1982, chapter 1), this paper considers a simple international trade model and examines the existence and characterization of free trade equilibria involving the unequal exchange of labor (UE). The paper provides an almost complete characterization of the domain of economies in which free trade equilibria withincomplete specialization exist. Moreover, the necessary and sufficient conditions for free trade equilibrium to involve UE is identified. It suggests that the emergence of free trade equilibria with UE cannot be entailed by the competitive mechanism of markets and unequal distribution of wealth alone, but might be understood as an outcome of equilibrium selection on the basis of Nash bargaining between rich and poor nations.

DOI

https://doi.org/10.7275/8448604

Recommended Citation

Yoshihara, Naoki and Kaneko, Soh, "On the Existence and Characterization of Unequal Exchange in the Free Trade Equilibrium" (2016). Economics Department Working Paper Series. 203.
https://doi.org/10.7275/8448604