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The Welfare Effects of Imperfect Harmonisation of Trade and Industrial Policy

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  • Gatsios, Konstantine
  • Karp, Larry

Abstract

Partial cooperation in setting trade and industrial policies may not benefit members of a customs union if exporters outside the union react aggressively. Even if the union comprises the entire noncompetitive sector of industry, cooperation on trade policy may be disadvantageous if industrial policy (e.g., investment subsidies) are chosen noncooperatively; cooperation in trade policy may exacerbate the inefficiencies created by noncooperation in investment. Cooperation in choosing trade policies may also encourage investment by competitive importers and, thus, reduce the demand faced by the oligopolists; this may more than offset the ex post benefits of cooperation. Copyright 1992 by Royal Economic Society.

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  • Gatsios, Konstantine & Karp, Larry, 1992. "The Welfare Effects of Imperfect Harmonisation of Trade and Industrial Policy," Economic Journal, Royal Economic Society, vol. 102(410), pages 107-116, January.
    • Handle: RePEc:ecj:econjl:v:102:y:1992:i:410:p:107-16
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    Cited by:

    1. Rothschild, R. & Heywood, John S. & Monaco, Kristen, 2000. "Spatial price discrimination and the merger paradox," Regional Science and Urban Economics, Elsevier, vol. 30(5), pages 491-506, September.
    2. Aya Ahmed, 2015. "Asymmetric cartel formation under trade liberalization: Heterogeneous ï¬ rms with capacity constraints," Working Papers 2015.02, International Network for Economic Research - INFER.
    3. Karp, Larry, 1996. "Monopoly Power Can Be Disadvantageous in the Extraction of a Durable Nonrenewable Resource," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 825-849, November.
    4. Huizinga, Harry & Nielsen, Søren Bo, 2005. "Capital Income Tax Coordination and the Income Tax Mix," Working Papers 24-2005, Copenhagen Business School, Department of Economics.
    5. Conconi, Paola, 2000. "Trade Bloc Formation Under Imperfect Competition," Economic Research Papers 269342, University of Warwick - Department of Economics.
    6. Ngo Long, 2015. "Dynamic Games Between Firms and Infinitely Lived Consumers: A Review of the Literature," Dynamic Games and Applications, Springer, vol. 5(4), pages 467-492, December.

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