Strategic Trade Policy With Domestic Cost Asymmetries
AbstractIn this paper we examine optimal strategic trade p[olicy under oligopoly with many home and foreign firms when the firms have different levels of efficiency and where a trade-off exists between the subsidy bill and firms profits. 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 funds is sufficiently high. Whenoptimal policy is constrained to a uniform subsidy the optimal policy depends on the relative number of home and foreign firms and the curvature of demnand. Deficiencies of the uniform subsidies are examined.
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Bibliographic InfoPaper provided by College Dublin, Department of Political Economy- in its series Papers with number 97/27.
Length: 22 pages
Date of creation: 1997
Date of revision:
Contact details of provider:
Postal: Ireland; University College Dublin, Department of Political Economy, Centre for Economic Research, Belfield, Dublin 4
Fax: +353-1-283 0068
Web page: http://www.ucd.ie/economics/
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TRADE ; MARKET STRUCTURE;
Find related papers by JEL classification:
- 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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- Erling Holmøy, 2003. "Aggregate Industry Behaviour in a Monopolistic Competition Model with Heterogeneous Firms," Discussion Papers 352, Research Department of Statistics Norway.
- Ngo Van Long & Antoine Soubeyran, 2003. "A Theory of Favoritism under International Oligopoly," CIRANO Working Papers 2003s-15, CIRANO.
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