Discussion Papers in Economics

Planning Unit, Indian Statistical Institute, Delhi

#03-04:

Endogenous Trading Bloc Formation in a North-South Global Economy
Satya P.Das and Subhadip Ghosh

Abstract

Majority of the trading blocs to date are between similar countries, rather than between developed and developing countries. This paper provides a rationale for why trading blocs among similar countries may arise as an equilibrium phenomenon. It develops a model of an asymmetric world economy, in which there are at least four countries. The countries are differentiated with respect to their market size and market structure.

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