chapter  2
36 Pages

Commodity Movements: Production Aspects

In the following discussion we shall examine the effects of the removal of trade barriers within a union on the two components of world welfare: efficiency in resource allocation (static efficiency) and intercountry income distribution. Throughout the argument it will be assumed that no factor movements take place between countries, and, furthermore, we shall disregard the dynamic effects of integration (increasing returns, external economies, etc.). The assumption of intercountry factor immobility will be removed in Chapter 4, while the discussion of dynamic effects follows in Part II.7