The University of Southampton
University of Southampton Institutional Repository

Are the antiglobalists right? Gains-from-trade without a Walrasian auctioneer

Are the antiglobalists right? Gains-from-trade without a Walrasian auctioneer
Are the antiglobalists right? Gains-from-trade without a Walrasian auctioneer
We show that the “fear” of globalisation can be rationalised by economic theory in the standard AD/AS equilibrium model, if we substitute the coordinational role of the Auctioneer by an implementation device based on learning (Guesnerie in Am Econ Rev 82, 1254–1278, 1992). When endowing producers with a learning ability to forecast market prices, individual profit-maximizing production decisions become interdependent in a strategic sense (strategic substitutes). Performing basic comparative statics exercises, we show that “competitiveness” matters in a precise sense: as foreign producers gain access to the home market, home producers’ ability to forecast market prices is undermined, so being their ability to forecast the profit consequences of their production decisions. A standard open economy exercise shows that the efficiency gains triggered by increased competition have to be traded-off against higher uncertainty (a lower likelihood to coordinate upon the welfare enhancing free-trade equilibrium). We interpret it as a new rationale for the existence of barriers to trade targeting coordination, rather than protecting mere inefficient sectors or industries (political economy driven). Finally, we show that classical measures evaluating ex-ante the desirability of economic integration (net welfare gains) do not always advice free trade.
0938-2259
561-592
Calvo-Pardo, Hector
07a586f0-48ec-4049-932e-fb9fc575f59f
Calvo-Pardo, Hector
07a586f0-48ec-4049-932e-fb9fc575f59f

Calvo-Pardo, Hector (2009) Are the antiglobalists right? Gains-from-trade without a Walrasian auctioneer. Economic Theory, 38 (3), 561-592. (doi:10.1007/s00199-007-0325-5).

Record type: Article

Abstract

We show that the “fear” of globalisation can be rationalised by economic theory in the standard AD/AS equilibrium model, if we substitute the coordinational role of the Auctioneer by an implementation device based on learning (Guesnerie in Am Econ Rev 82, 1254–1278, 1992). When endowing producers with a learning ability to forecast market prices, individual profit-maximizing production decisions become interdependent in a strategic sense (strategic substitutes). Performing basic comparative statics exercises, we show that “competitiveness” matters in a precise sense: as foreign producers gain access to the home market, home producers’ ability to forecast market prices is undermined, so being their ability to forecast the profit consequences of their production decisions. A standard open economy exercise shows that the efficiency gains triggered by increased competition have to be traded-off against higher uncertainty (a lower likelihood to coordinate upon the welfare enhancing free-trade equilibrium). We interpret it as a new rationale for the existence of barriers to trade targeting coordination, rather than protecting mere inefficient sectors or industries (political economy driven). Finally, we show that classical measures evaluating ex-ante the desirability of economic integration (net welfare gains) do not always advice free trade.

Full text not available from this repository.

More information

Published date: March 2009
Organisations: Economics

Identifiers

Local EPrints ID: 65404
URI: https://eprints.soton.ac.uk/id/eprint/65404
ISSN: 0938-2259
PURE UUID: 8eb77ae8-adb1-4aa8-a510-5dd7392df6dd
ORCID for Hector Calvo-Pardo: ORCID iD orcid.org/0000-0001-6645-4273

Catalogue record

Date deposited: 09 Feb 2009
Last modified: 06 Jun 2018 12:40

Export record

Altmetrics

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of https://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×