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"Industrial Targeting and Free Trade Areas"

Earl L. Grinols and Peri Silva

 

First Author :

Earl L. Grinols
Economics
University of Illinois at Urbana-Champaign
1206 S. Sixth Street, M/C 706
Champaign, IL 61820
USA

grinols@uiuc.edu

http://www.business.uiuc.edu/faculty/grinols.html


Second Author :

Peri Silva
Economics
University of Illinois at Urbana-Champaign
1206 S. Sixth Street, M/C 706
Champaign, IL 61820
USA

pasilva@uiuc.edu

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Abstract :
 
In this paper we construct a mechanism where any group of nations can form a welfare enhancing free trade area and, at the same time, satisfy their industrialization targets efficiently. The mechanism does not rely on cross-country transfers and, therefore, allows each member country to reap welfare gains from the formation of the free trade area. Since industrialization targets are satisfied and neither tariff harmonization nor cross-country transfers are necessary, the mechanism presented in this paper is politically palatable.

 
 
JEL Classification : D60 , E13 , F15
 
 
Keywords :
 
Free trade areas, industrialization targets, rules of origin, welfare analysis
 
 
Manuscript Received : 2003
Manuscript Published : 2003
 
 
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