Regional integration agreements are examples of second-best policies and have an ambiguous impact on welfare. This article builds a model in which regional integration agreements unambiguously raise welfare by correcting for externalities. It assumes that trade between neighboring countries...

This paper explores a world in which regional trade agreements help reduce security tensions between neighbors.Regional integration agreements (RIAs) are examples of second best and have an ambiguous impact on welfare, contend Schiff and Winters.They build a model in which RIAs unambiguously...

This is a theoretical and empirical study of trade policy in a small open economy with intermediate inputs. The first part develops a theoretical model and obtains expressions for optimal second-best tariffs on an intermediate input. In the second part, we estimate, for Pakistan, the optimal...

Democratic countries with substantial inequality and where people believe that success depends on connections and luck induce political support for high tax rates and generous welfare states. Traditional wisdom is that such policies harm the economy, but there is not much evidence that countries...