Measuring the Gains from International Trade Allocated Across Countries
The intraindustry trade, multiple posttrade equilibria and multiple pretrade equilibria almost invalidate the role of the terms of trade as a divider of trade gains and as a predictor of the direction of trade. The indices of international trade benefits (ITB), which will be developed in this paper, aim at complementing what the terms of trade lacks as well as making it possible to utilize the estimated trade gains in a meaningful manner.The indices relatively measure the portion that a trading country takes out of whole trade benefits created by all trading countries at a given moment rather than recognize the absolute level of trade benefits for each of trading countries. The outcome values of indices state the extent of how favorably a country is conducting international trades with its partner country as compared with other countries whether the absolute level of trade benefits is on the increase or on the decrease. In fact, they also show the level of trade benefits that a certain country achieves from the increase of one dollar's worth of trade with its trading partner country. The indices of measuring the trade gains consist of basic ITB, principal ITB and complementary ITB indices. Basic ITB indices suggest the potential benefits embedded in one dollar's worth of trade. The product of basic ITB indices and trade volume factor of individual trading country equals principal ITB indices, which help settle such questions as which country gains the biggest benefits and gives the biggest benefits. Complementary ITB indices provide information necessary to confirm the status of an individual country in the international trade market. As a result of analyzing the internal trade between fifteen EU member countries, it proves true that the indices are effective in terms of measuring the trade gains distributed across countries.
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Purdue CIBER Working Papers
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