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Title: |
Inter-industrial Externalities and the Theory
of Customs Unions |
| Author: |
Yu, Eden S. H.;
Choi, Jai-Young |
| Author
Affiliation: |
LA State U;
Lamar U |
| Source: |
International Economic Journal, Summer 1992, v. 6, no. 2, pp. 17-26 |
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Publication Date: |
Summer 1992 |
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Abstract: |
This paper investigates how the existence
of inter-industrial externalities in addition to variable returns to
scale may affect the welfare of an economy which joins a trade-creating
or a trade-diverting customs union. It is shown that the ranking between
the output elasticities of inter-industrial externalities play a crucial
role in determining the welfare effect associated with trade creation
and trade diversion. In particular, the mere presence of
inter-industrial externalities without accompanied by intra-industrial
externalities may be sufficient to generate paradoxical welfare effects. |
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