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Stolper-Samuelson Revisited: Trade and Distribution with Oligopolistic Profits

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  • Robert A. Blecker

Abstract

This paper investigates the distributional impact of international trade when goods markets are oligopolistic and firms partially pass-through changes in tariffs into prices and factor costs for differentiated products. Trade liberalization raises mark-ups and profit shares in the export industry and lowers them in the import-competing industry, while Stolper-Samuelson effects on real prices of primary factors are attenuated or possibly reversed. An extended model shows how "offshoring" (trade in intermediate goods) can potentially increase mark-ups for oligopolistic producers of final goods. The analysis illuminates why business interests generally support trade liberalization policies today, regardless of their countries' factor abundance.

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File URL: http://www.american.edu/cas/economics/pdf/upload/2012-6.pdf
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Paper provided by American University, Department of Economics in its series Working Papers with number 2012-06.

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Date of creation: Feb 2012
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Handle: RePEc:amu:wpaper:2012-06

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Web page: http://www.american.edu/cas/economics/

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