An International Trade Model with Entrepreneurs and Financial Markets

Bodil Olai Hansen, Hans Keiding

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We consider a two-period model of a three-country world with free trade in finished products and some factor mobility, where production is subject to uncertainty. Enterpreneurs may establish production in other countries but can obtain financing only in the country of origin. In this model, integrating production across countries, in particular integrating economically strong and weak partners, may give rise to a welfare loss, showing that traditional views on efficiency of international trade must be reconsidered when risk and uncertainty are taken into account.
Original languageEnglish
JournalTechnology and Investment
Issue number3
Pages (from-to)96-106
Publication statusPublished - Aug 2016


  • International trade
  • Entrepreneurs
  • Pareto Inferior Trade
  • Regional integration

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