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The Effects of Strategic Subsidies under FTA with ROO

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  • Kazuhiro Takauchi

Abstract

This paper presents a model of a free trade area (FTA) with rules of origin (ROO) under an oligopolistic final goods market. Following the existing literature, we also consider ROO to serve as a protectionist device and mainly focus on the interaction between ROO and the subsidy policy. A paradoxical result is considered: if the government of the final goods exporter within the FTA is the first mover, it chooses export tax. Furthermore, we show that the profit of a firm located in the FTA increases due to a reduction in the external tariff.

Suggested Citation

  • Kazuhiro Takauchi, 2010. "The Effects of Strategic Subsidies under FTA with ROO," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 17(1), pages 57-72.
    • Handle: RePEc:taf:raaexx:v:17:y:2010:i:1:p:57-72
    DOI: 10.1080/16081625.2010.9720852
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    Cited by:

    1. Kazuhiro Takauchi, 2014. "Rules of Origin and Strategic Choice of Compliance," Journal of Industry, Competition and Trade, Springer, vol. 14(2), pages 287-302, June.
    2. Takauchi, Kazuhiro, 2015. "Strategic export policy, monopoly carrier, and product differentiation," MPRA Paper 66003, University Library of Munich, Germany.
    3. Tomomichi Mizuno & Kazuhiro Takauchi, 2020. "Optimal Export Policy With Upstream Price Competition," Manchester School, University of Manchester, vol. 88(2), pages 324-348, March.

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