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A 3 × 3 model of customs unions
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A 3 × 3 model of customs unions

Raymond Riezman
Journal of international economics, Vol.9(3), pp.341-354
08/01/1979
DOI: 10.1016/0022-1996(79)90030-8

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Abstract

In this paper we develop a three-country-three-good model of customs unions. The main result is that a sufficient condition for two countries to benefit from forming a customs union is that they are similar in the sense that their mutual trade is small. This result is obtained by analyzing the terms of trade effects rather than the more traditional emphasis on trade creation-trade diversion effects.

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