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Strategic Export Policy in the Presence of Subcontracting

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  • Chen, Ho-Chyuan

    ()
    (National Kaohsiung First University of Science and Technology)

  • Liang, Wen-Jung

    (Tamkang University)

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    Abstract

    This paper examines the optimal export policies when ex ante negotiation over subcontract manufacturing occurs between two competing international-firms. It show that it could be optimal for the exporting country to adopt either a different or a parallel trade policy between the two exporting goods (the final product and the subcontracted product). However, a different trade policy that taxes the finalproduct export and subsidizes the subcontracted-product export is not ever optimal. When the exporting firm is a pure subcontractor, taxing the single export (subcontracted product) becomes the only optimal trade policy of the exporting country. Morever, the exporting country imposes a less aggressive trade policy in response given that the importing country inflicts a more aggressive trade policy.

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    Bibliographic Info

    Article provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.

    Volume (Year): 22 (2007)
    Issue (Month): ()
    Pages: 973-994

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    Handle: RePEc:ris:integr:0420

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    Web page: http://econo.sejong.ac.kr/
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    Related research

    Keywords: Subcontracting; International Trade; Nash Bargaining; Trade Policy;

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