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Bilateralism Is Good: Trade Blocs and Strategic Export Subsidies

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Author Info
Collie, David R

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Abstract

This paper considers the effect of exogenous trade bloc enlargement in a multicountry version of the Brander-Spencer export subsidy game. In the single-shot game, it is shown that trade bloc enlargement leads to a reduction in the Nash equilibrium export subsidies and thereby increases the welfare of the exporting countries. Although the welfare of the importing countries decreases, world welfare may increase if the export subsidies are financed by distortionary taxation. When the export subsidy game is infinitely repeated, it is shown that trade bloc enlargement reduces the critical discount factor making it easier to sustain free trade. Copyright 1997 by Royal Economic Society.

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Publisher Info
Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 49 (1997)
Issue (Month): 4 (October)
Pages: 504-20
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Handle: RePEc:oup:oxecpp:v:49:y:1997:i:4:p:504-20

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  1. Mario Marazzi, 2002. "On the fragility of gains from trade under continuously differentiated bertrand competition," International Finance Discussion Papers 735, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  2. Baldwin, Richard, 2008. "Big-Think Regionalism: a Critical Survey," CEPR Discussion Papers 6874, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Kyle Bagwell & Robert W. Staiger, 2000. "GATT-Think," NBER Working Papers 8005, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
    • Kyle Bagwell & Robert W. Staiger, 2002. "GATT-think," Discussion Papers 0102-39, Columbia University, Department of Economics. [Downloadable!]
  4. Kyle Bagwell & Robert W. Staiger, 2000. "Strategic Trade, Competitive Industries and Agricultural Trade Disputes," NBER Working Papers 7822, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Conconi, P., 2000. "Trade Bloc Formation Under Imperfect Competition," The Warwick Economics Research Paper Series (TWERPS) 571, University of Warwick, Department of Economics. [Downloadable!]
  6. Yochanan Shachmurove & Uriel Spiegel, 2004. "Size Does Matter: International Trade and Population Size," PIER Working Paper Archive 04-035, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
  7. repec:att:wimass:1920011 is not listed on IDEAS
  8. David Collie, 2000. "A Rationale for the WTO Prohibition of Export Subsidies: Strategic Export Subsidies and World Welfare," Open Economies Review, Springer, vol. 11(3), pages 229-245, July. [Downloadable!] (restricted)
  9. Winters, L. Alan, 1996. "Regionalism versus multilateralism," Policy Research Working Paper Series 1687, The World Bank. [Downloadable!]
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