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The gains from trade revisited

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<mark>Journal publication date</mark>04/2011
<mark>Journal</mark>International Review of Economics and Finance
Issue number2
Number of pages9
Pages (from-to)193-201
Publication statusPublished
Original languageEnglish


This paper revisits the issue of whether countries gain more from trading with countries that are similar to themselves, or with countries that are different. A model based on relative endowment and technological differences across countries is developed. The main result is that a country may experience a region of increasing gains from trade as its trading partner becomes more similar to itself in terms of relative endowments. The model also predicts that for countries with sufficiently similar relative endowments, both factors of production may experience gains from trade.