Peer-reviewed publications:

Working papers and ongoing projects:

Wealth Inequality, Asset Price Bubbles and Financial Crises. World Inequality Lab Working Paper 2025/01


David and Goliath: Welfare effects of a Free Trade Agreement between assymetric countries

This paper examines the welfare and trade effects of a Free Trade Agreement (FTA) between a small economy (Kosovo) and a large economy (Turkey). Using a partial equilibrium model,   we simulate ex ante changes in producer and consumer surplus, tariff revenue, and trade balance, at the industry level. The simulations predict that Kosovo, as the smaller partner, experiences modest reductions in producer surplus, offset by significantly larger gains in consumer surplus, particularly in sectors comprising a substantial share of imports, such as textiles, food, and machinery. However, the aggregate net welfare impact is negative, primarily attributable to significant reductions in tariff revenues, resulting in an estimated net welfare loss of 0.1% of GDP. Comparing these projections to observed data from the initial three years of the FTA's implementation, we find that while the model accurately predicts changes in export levels, it underestimates the magnitude of the trade deficit and tariff revenue losses. These findings contribute to the literature on FTAs between asymmetric economies by demonstrating that, in the short run, limited industrial capacities constrain the supply side of the small country, preventing it from fully benefiting from market access.


Policy papers: