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Strategic Trade Policy When Firms Have Different Efficiency Levels

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  • Leahy, Dermot
  • Montagna, Catia

Abstract

In this paper we examine optimal strategic trade policy under oligopoly with many home and foreign firms when the firms have different levels of efficiency. The first-best policy involves a structure of firm-specific export subsidies and export taxes in which the government favours the most efficient firms unless the social cost of government funds is sufficiently high. When optimal policy is constrained to a uniform subsidy the optimal policy depends on the relative number of home and foreign firms and the curvature of demand. Deficiencies of the uniform subsidy are examined.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1549.

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Date of creation: Jan 1997
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Handle: RePEc:cpr:ceprdp:1549

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Related research

Keywords: Export Subsidies; Heterogeneous Firms; Stategic Trade Policy;

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Cited by:
  1. Derbel, Hatem & Abdelkafi, Rami & Chkir, Ali, 2007. "Impact du commerce extérieur sur la productivité au sein des secteurs en Tunisie : cas de l’industrie manufacturière
    [Impact of foreign trade on productivity within sectors in Tunisia: the cas
    ," MPRA Paper 8533, University Library of Munich, Germany, revised Oct 2007.
  2. Barros, Pedro P & Nilssen, Tore, 1999. " Industrial Policy and Firm Heterogeneity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(4), pages 597-616, December.
  3. Erling Holmøy, 2003. "Aggregate Industry Behaviour in a Monopolistic Competition Model with Heterogeneous Firms," Discussion Papers 352, Research Department of Statistics Norway.
  4. Dermot Leahy & Catia Montagna, 1998. "Targeted Strategic Trade Policy with Domestic Cost Heterogeneity," Dundee Discussion Papers in Economics 100, Economic Studies, University of Dundee.

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