Trade uncertainty and specialization. Social versus private planning

Charles van Marrewijk*, Peter A.G. van Bergeijk

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

16 Citations (Scopus)

Abstract

A small trading economy which produces and trades an arbitrary, but finite, number of goods and faces given terms of trade in combination with an uncertain volume of trade is studied. An exogenous probability of trade disruption forces both public and private decision-makers to specialize to a lesser extent in accordance with their comparative advantage. A unique optimal point of production exists for each probability of trade disruption. A private competitive economy will not produce at this point: it produces too much of the good with a comparative advantage.

Original languageEnglish
Pages (from-to)15-32
Number of pages18
JournalDe Economist
Volume138
Issue number1
DOIs
Publication statusPublished - Mar 1990
Externally publishedYes

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