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Decentralized international exchange

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Abstract.  We utilize a random‐matching model to examine the relationships between market frictions and international trade. In our setting, an individual may choose to search abroad where she may have a cost advantage, but is less likely to meet potential trading partners, owing to higher market frictions. Interestingly, we find that international trade may be associated with lower welfare than autarky. We show how this is due to price distortions resulting from bargaining when there are opportunities for exchange across countries. JEL classification F10, C78, D83

French
Echanges internationaux décentralisés. 

Les auteurs utilisent un modèle d’arrimage aléatoire pour examiner les relations entre les coûts de transaction dans le marché et le commerce international. On postule qu’un individu peut choisir de chercher des partenaires commerciaux dans d’autres pays où il peut avoir un avantage de coûts mais qu’il est moins susceptible de rencontrer de tels partenaires à cause des coûts de transaction. Il appert que le commerce international peut être associéà un niveau de bien‐être plus bas que ce que générerait l’autarcie. On montre comment cela est attribuable aux distorsions de prix qui découlent du marchandage quand il y a des opportunités d’échange entre pays.
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Document Type: Research Article

Affiliations: 1: Department of Economics, University of Kentucky 2: The Services Group

Publication date: 2006-05-01

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