Strategic Trade Policy When Firms Have Different Efficiency Levels
AbstractIn 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 InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1549.
Date of creation: Jan 1997
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Other versions of this item:
- C Montagna, . "Strategic Trade Policy When Firms Have Different Efficiency Levels," Dundee Discussion Papers in Economics 070, Economic Studies, University of Dundee.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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