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The Political Economy of Strategic Trade Policies

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  • K. C. Fung
  • Chelsea C. Lin
  • Ray-Yun Chang

Abstract

This paper applies Grossman and Helpman's (1994 ) common agency model to investigate the formation of strategic export subsidy and strategic import tariff under both Cournot competition and Bertrand competition. The results of this paper indicate that even with political pressure, the Grossman-Helpman politically-determined export policy is identical to the rent-shifting export policy, which is export subsidy (export tax) in Cournot (Bertrand) competition. The politically-determined import tariff will be higher than the optimal level. This paper highlights the possibility that lobbying can restore the level of trade intervention to a more efficient one in the absence of the benevolent dictator. Copyright � 2009 The Authors. Journal compilation � 2009 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 17 (2009)
Issue (Month): 3 (08)
Pages: 494-509

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Handle: RePEc:bla:reviec:v:17:y:2009:i:3:p:494-509

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Cited by:
  1. Kim, Young-Han & Kim, Sang-Kee, 2012. "Welfare effects of competitive lobbying efforts in international oligopoly markets," Economic Modelling, Elsevier, vol. 29(3), pages 614-620.
  2. Udo Broll & Jack E. Wahl & Christoph Wessel, 2011. "Export, Exchange Rate Risk and Hedging: The Duopoly Case," German Economic Review, Verein für Socialpolitik, vol. 12(4), pages 490-502, November.

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