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This study explores how income inequality among individuals in each country and trade costs depicting geographic distance between countries impact economic welfare and regime choice under representative democracy, comparing three trading regimes: most favored nation, customs union, and free trade agreement. We examine two cases: one in which trade costs are incurred symmetrically among all countries, and the other in which no trade costs are incurred among the potential member countries, but only between them and nonmembers. In each case, we identify the political feasibility of each regime as well as the impact on the average welfare levels. [ABSTRACT FROM AUTHOR]

This study investigates the effects of globalization-specifically, a reduction in trade costs-on trade policies implemented under unilateral and cooperative policy regimes. The results demonstrate opposite responses to the advancement of globalization under the two regimes: (i) the unilateral policy regime induces governments to raise tariff rates with the progress of globalization, while (ii) the cooperative policy regime allows governments to reduce tariffs. [ABSTRACT FROM AUTHOR]

Departing from the exogenous treatment of transport costs, this study examines endogenous transport costs and their impact on firm location in new trade theory. Previous studies argue that, if exogenous transport costs in a large country are sufficiently higher than in a small country, then the home market effect disappears. In our model, national governments control domestic transport costs via public infrastructure investment. Our study presents persuasive findings that a large country always collects more tax revenue for public investment than a small country, which results in lower domestic transport costs, and hence, the home market effect always prevails. [ABSTRACT FROM AUTHOR]