Necessarily welfare-enhancing customs unions with industrialization constraints: The Cooper-Massell-Johnson-Bhagwati conjecture |
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Authors: | Pravin Krishna Jagdish Bhagwati |
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Institution: | aDepartment of Economics, Brown University, RI 02912 Providence, USA;bDepartment of Economics, Columbia University, 10027 New York, USA |
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Abstract: | This paper demonstrates that welfare-improving Customs Unions can be guaranteed even if we are constrained by specific non-economic government objectives, thus proving the Cooper-Massell-Johnson-Bhagwati conjecture. We consider a ‘production’ objective here, where a member country requires the output of a particular sector (e.g. a target level of industrialization) to be maintained at the pre-union level, and show that welfare-improving Customs Unions can still be achieved. It is straightforward to show that this result can be extended to other non-economic objectives as well. |
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Keywords: | Customs unions Non-economic objectives Kemp-Wan theorem Trade diversion |
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