Taste for Imports and Market Integration

• Autor(a) principal: Barros, Pedro Pita
• Data de Publicação: 1994
• Outros Autores: Martinez-Giralt, Xavier
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10362/85988

We purport to assess the effects of market integration when preferences for the foreign good differ across domestic consumers. We consider a characteristics line with two locations at the end points (countries). Consumers are in one or in the other country, with zero density otherwise. Preference for the foreign good varies across consumers. We show that while the pre-integration equilibrium had two-way trade, induced by taste differences, the post-integration equilibrium may have two-way trade or one-way trade. The one-way trade runs from the small country to the big economy. Welfare effects of market integration are also addressed.