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American Economic Review: Vol. 102 No. 3 (May 2012)
AER Volume. 102, Issue 3 | 
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Trade Agreements and the Nature of Price Determination
Article Citation
Antràs, Pol, and
Robert W. Staiger. 2012. "Trade Agreements and the Nature of Price Determination."
American Economic Review,
102(3): 470-76.
DOI: 10.1257/aer.102.3.470
DOI: 10.1257/aer.102.3.470
Abstract
According to the terms-of-trade theory, negotiations over tariffs alone, coupled with an effective market access preservation rule, can bring governments to the efficiency frontier. In this paper, we show that the nature of international price determination is important for this central result of the terms-of-trade theory. While the received theory assumes that international prices are fully disciplined by aggregate market clearing conditions, we show here that support for "shallow" integration is overturned, and instead a need for "deep" integration is suggested ? wherein direct negotiations occur over both border and behind-the-border policies ? if international prices are determined through bargaining.
Article Full-Text Access
Full-text Article
Authors
Antràs, Pol (Harvard U)
Staiger, Robert W. (U WI)
Staiger, Robert W. (U WI)
JEL Classifications
F13: Trade Policy; International Trade Organizations
F11: Neoclassical Models of Trade
F11: Neoclassical Models of Trade
