Economics Commons^™

This paper argues that regulatory measures affect the fixed costs of entering a market as well as the variable costs of servicing that market. The study has explained that market entry barriers limit the number of firms that can break even in a particular market. The higher the entry barrier relative to the size of the market, the smaller the number of firms that can break even after having incurred the entry cost. In the face of such entry costs, trade liberalisation, defined as a reduction in variable trade costs, would under realistic assumptions lead to an increase in trade …