International trade and trade creation under instability

David Bigman

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

The paper examines the lasting and real effects of random, short-term fluctuations in supply and demand, that are expecially characteristic of agricultural products, on the country's trade, welfare and income distribution. One effect of supply and demand variability is to considerably increase the trade flows over and above the trade generated by the country's permanent comparative advantage. Another effect is enhanced production risk that may increase rather than decline with free trade. For some crops free trade may therefore be Pareto inferior to autarky while for others it would still be Pareto efficient - depending mostly on the corresponding price elasticity of demand.

Original languageEnglish
Pages (from-to)309-330
Number of pages22
JournalEuropean Economic Review
Volume28
Issue number3
DOIs
StatePublished - 1 Jan 1985
Externally publishedYes

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