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Entry liberalization and export performance: a theoretical analysis in a multi-market oligopoly model

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  • Manmohan Agarwal
  • Alokesh Barua

Abstract

This paper is an attempt to demonstrate how the entry (costless) of firms in an industry may have a dramatic effect on exports from an industry in a country. The results have tremendous implications for LDCs suffering from resource and BOP constraints but having reservoirs of cheap labor. The welfare effects of such entry liberalization policy (or subsidy) can be stated from the Bhagwati theorem that a reduction in an only (single) distortion is necessarily welfare improving by reducing monopoly or oligopoly distortions. However, we have shown that the entry liberalization policy is welfare superior to an equivalent subsidy policy where equivalent is defined in terms of the impact on exports. As a by product, we have also shown how one can integrate the oligopoly models of trade with the general oligopoly literature. The results on the limiting behaviour of an open economy oligopoly model extend the standard results in the oligopoly theory in a closed economy.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/0963819042000240039
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal The Journal of International Trade & Economic Development.

Volume (Year): 13 (2004)
Issue (Month): 3 ()
Pages: 287-303

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Handle: RePEc:taf:jitecd:v:13:y:2004:i:3:p:287-303

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Related research

Keywords: Entry liberalization and export performance; entry; trade and the limiting behaviour;

References

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  1. Jeremy I. Bulow & John Geanakoplos & Paul D. Klemperer, 1983. "Multimarket Oligopoly," Cowles Foundation Discussion Papers 674, Cowles Foundation for Research in Economics, Yale University.
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Cited by:
  1. Barua, Alokesh & Chakraborty, Debashis & Hariprasad, C. G., 2010. "Entry, Competitiveness and Exports: Evidence from Firm Level Data of Indian Manufacturing," MPRA Paper 22738, University Library of Munich, Germany.

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