INTER-COUNTRY GAPS IN INCREASlNG-RETURNS-TO-SCALE TECHNOLOGIES AND THE CHOICE AMONG INTERNATIONAL ECONOMIC REGIMES

Abstract

The recent efforts of leading industrialized countries to reduce barriers on international transactions have been biased to trade in goods and capital and against labor migration. This paper examines the rationality of such an asymmetry in the liberalization policies by making a welfare comparison between countries under four different international economic regimes, (i)free trade in goods only, (ii)free trade in goods and labor force, (iii)free trade in goods and capital and (iv)free trade in goods and the factors of production in a general equilibrium model with the intra-industry trade which stems from monopolistic competition and increasing-returns-to-scale technologies using capital as a fixed input and labor as a variable input.