Tariffs and Firm-Level Heterogeneous Fixed Export Costs
AbstractThis paper presents a two-country intra-industry trade model with bilateral ad valorem tariffs and fixed export costs that are heterogeneous across firms. In this model not all firms will choose to export. We examine the effects of reciprocal changes in the tariff and the fixed export barrier on the number of firms, firm profits, tariff revenue and consumer welfare. We show that both types of trade barriers reduce (increase) the number of exporting (pure domestic) firms. However, the sum of available home and foreign varieties increases for small tariffs. Firm profits are falling in both tariff and fixed export cost barriers. Tariff revenue falls when fixed export costs increase whereas we have a Laffer curve effect for the tariff. Welfare falls when fixed export costs increase and increases for small tariffs and falls for large tariffs, i.e. there exists a welfare maximizing tariff.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.
Volume (Year): 5 (2006)
Issue (Month): 1 (July)
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Other versions of this item:
- Jan G. Jorgensen & Philipp J. H. Schröder, 2005. "Tariffs and Firm-Level Heterogeneous Fixed Export Costs," Discussion Papers of DIW Berlin 496, DIW Berlin, German Institute for Economic Research.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F15 - International Economics - - Trade - - - Economic Integration
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