IDEAS home Printed from https://ideas.repec.org/p/not/notgep/10-26.html
   My bibliography  Save this paper

Domestic entry, international trade cost reduction and welfare

Author

Listed:
  • Sugata Marjit
  • Arijit Mukherjee

Abstract

We show the welfare effects of international trade cost reduction under endogenous domestic market structure. If the domestic labour market is competitive, there is no integer constraint and the trade cost represents transportation cost, a reduction in the transportation cost does not affect (may reduce) domestic welfare if the products are perfect (imperfect) substitutes. If the trade cost represents tariff, domestic welfare is higher under a positive non-prohibitive tariff compared to both free trade and no trade. In the presence of an integer constraint, a lower transportation cost may reduce consumer surplus and increase the profits of the active domestic firms and domestic welfare, even if the products are homogeneous. If there is no integer (integer) constraint and the products are perfect substitutes, transportation cost reduction reduces (may increase) domestic welfare in the presence of a domestic labour union. We also show that entry for the domestic country may be socially excessive or insufficient under a competitive domestic labour market, while it is always socially insufficient in the presence of a domestic labour union.

Suggested Citation

  • Sugata Marjit & Arijit Mukherjee, 2010. "Domestic entry, international trade cost reduction and welfare," Discussion Papers 10/26, University of Nottingham, GEP.
  • Handle: RePEc:not:notgep:10/26
    as

    Download full text from publisher

    File URL: https://www.nottingham.ac.uk/gep/documents/papers/2010/10-26.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Oxford University Press, vol. 43(2), pages 217-235.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Arijit Mukherjee, 2012. "Social Efficiency of Entry with Market Leaders," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(2), pages 431-444, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. de Groot, Henri L. F. & Nahuis, Richard, 1998. "Taste for diversity and the optimality of economic growth," Economics Letters, Elsevier, vol. 58(3), pages 291-295, March.
    2. Todd D. Gerarden & Richard G. Newell & Robert N. Stavins, 2017. "Assessing the Energy-Efficiency Gap," Journal of Economic Literature, American Economic Association, vol. 55(4), pages 1486-1525, December.
    3. Richard A. Brecher & Zhiqi Chen, 2014. "Unemployment and welfare consequences of international outsourcing under monopolistic competition," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(2), pages 540-554, May.
    4. Aseem Kaul & Jiao Luo, 2018. "An economic case for CSR: The comparative efficiency of for‐profit firms in meeting consumer demand for social goods," Strategic Management Journal, Wiley Blackwell, vol. 39(6), pages 1650-1677, June.
    5. Gehrig, Thomas & Jackson, Matthew, 1998. "Bid-ask spreads with indirect competition among specialists," Journal of Financial Markets, Elsevier, vol. 1(1), pages 89-119, April.
    6. Lundberg, Alexander, 2015. "Non-monotonic network effects and market entry," Economics Letters, Elsevier, vol. 137(C), pages 146-149.
    7. Ramon Caminal, 2016. "Dynamic Product Diversity," Journal of Industrial Economics, Wiley Blackwell, vol. 64(1), pages 1-26, March.
    8. Boyan Jovanovic, 1993. "The Diversification of Production," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1 Microec), pages 197-247.
    9. Jeffrey M. Perloff & Steven C. Salop, 1985. "Equilibrium with Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 52(1), pages 107-120.
    10. Pierre M. Picard & Eric Toulemonde, 2009. "On monopolistic competition and optimal product diversity: workers' rents also matter," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(4), pages 1347-1360, November.
    11. Mion, Giordano & Jacob, Nick, 2020. "On the productivity advantage of cities," CEPR Discussion Papers 14644, C.E.P.R. Discussion Papers.
    12. Javier Coto‐Martínez & María D. C. García‐Alonso & Paul Levine, 2009. "Taste For Variety And Optimum Product Diversity In An Open Economy," Bulletin of Economic Research, Wiley Blackwell, vol. 61(2), pages 127-138, April.
    13. Rey, Patrick & Salant, David, 2012. "Abuse of dominance and licensing of intellectual property," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 518-527.
    14. Shon M. Ferguson, 2015. "Endogenous Product Differentiation, Market Size and Prices," Review of International Economics, Wiley Blackwell, vol. 23(1), pages 45-61, February.
    15. Bettendorf, Leon J.H. & Heijdra, Ben J., 1999. "Intergenerational and international welfare leakages of a tariff in a small open economy," CCSO Working Papers 199910, University of Groningen, CCSO Centre for Economic Research.
    16. Lawrence J. White, 1985. "Resale Price Maintenance And The Problem Of Marginal And Inframarginal Customers," Contemporary Economic Policy, Western Economic Association International, vol. 3(3), pages 17-21, March.
    17. Ottaviano, Gianmarco & Thisse, Jacques-François, 1999. "Monopolistic Competition, Multiproduct Firms and Optimum Product Diversity," CEPR Discussion Papers 2151, C.E.P.R. Discussion Papers.
    18. Martin Gaynor, "undated". "What Do We Know About Competition and Quality in Health Care Markets?," GSIA Working Papers 2006-E62, Carnegie Mellon University, Tepper School of Business.
    19. Edward C. Prescott & Stephen L. Parente, 1999. "Monopoly Rights: A Barrier to Riches," American Economic Review, American Economic Association, vol. 89(5), pages 1216-1233, December.
    20. Steven Berry & Alon Eizenberg & Joel Waldfogel, 2016. "Optimal product variety in radio markets," RAND Journal of Economics, RAND Corporation, vol. 47(3), pages 463-497, August.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:not:notgep:10/26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hilary Hughes (email available below). General contact details of provider: https://edirc.repec.org/data/cgnotuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.