National Product Preferences and International Trade
AbstractWe show that when two countries are the same size then the country with stronger preferences in favour of domestic varieties of differentiated goods produced under increasing returns (IRS) will be the net exporter of that good. It is also shown that strong preferences for domestic varieties reduce welfare in the other country and that unilateral trade barriers will necessarily improve welfare there. Moreover, the country with the weaker preferences for domestic varieties may benefit from trade restrictions even when this leads to a trade war. We also show that such preferences may explain low import penetration in IRS-goods. Finally, we discuss the policy implications of such preferences. It is argued that this model can be used to for example capture aspects of US-Japan trade in high-tech goods.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Trade Union Institute for Economic Research in its series Working Paper Series with number 145.
Length: 22 pages
Date of creation: 21 Aug 1997
Date of revision:
national preferences; trade war; Japan;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-1998-10-26 (All new papers)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sune Karlsson).
If references are entirely missing, you can add them using this form.