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Vertical Integration and Trade Protection: The Case of Antidumping Duties

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  • Maya Cohen-Meidan

    (Stanford University)

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    Abstract

    This paper analyzes the interaction of trade policy with the vertical structures of foreign firms exporting goods to the United States, focusing on the case of antidumping duties. I use a model that incorporates both vertical structure and the dynamics of U.S. antidumping duties to show that the policy has a notably different impact on vertically integrated and non-integrated foreign firms. I then successfully test the theoretical predictions using data on 489 antidumping cases. In particular, I find that non-integrated firms are more likely than vertically integrated firms to exit the U.S. market following the imposition of duties, and less likely to pass the duties on to consumers for certain products. My empirical findings also indicate that antidumping duties oscillate between low and high levels -a previously unnoticed, surprising and most-likely unintended consequence of the design of U.S. antidumping policy that is nevertheless predicted by my model.

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    Bibliographic Info

    Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 08-034.

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    Date of creation: Mar 2009
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    Handle: RePEc:sip:dpaper:08-034

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    Related research

    Keywords: Vertical Intrgration; antidumping duties; trade policy;

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    References

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    1. Antràs, Pol & Helpman, Elhanan, 2004. "Global Sourcing," CEPR Discussion Papers 4170, C.E.P.R. Discussion Papers.
    2. Ornelas, Emanuel & Turner, John L., 2008. "Trade liberalization, outsourcing, and the hold-up problem," Journal of International Economics, Elsevier, vol. 74(1), pages 225-241, January.
    3. repec:hrv:faseco:4784029 is not listed on IDEAS
    4. Thomas J. Prusa, 1996. "The Trade Effects of U.S. Antidumping Actions," Departmental Working Papers 199603, Rutgers University, Department of Economics.
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    6. Bruce A. Blonigen & Jee-Hyeong Park, 2000. "Dynamic Pricing in the Presence of Antidumping Policy: Theory and Evidence," University of Oregon Economics Department Working Papers 2001-1, University of Oregon Economics Department, revised 01 Jul 2001.
    7. Emanuel Ornelas & John L. Turner, 2008. "Protection and international sourcing," LSE Research Online Documents on Economics 28511, London School of Economics and Political Science, LSE Library.
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    9. David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," Econometric Society 2004 North American Summer Meetings 508, Econometric Society.
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    13. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
    14. Robert C. Feenstra, 1997. "Introduction to "The Effects of U.S. Trade Protection and Promotion Policies"," NBER Chapters, in: The Effects of U.S. Trade Protection and Promotion Policies, pages 1-7 National Bureau of Economic Research, Inc.
    15. Bruce A. Blonigen & Stephen E. Haynes, 2002. "Antidumping Investigations and the Pass-Through of Antidumping Duties and Exchange Rates," American Economic Review, American Economic Association, vol. 92(4), pages 1044-1061, September.
    16. Gallaway, Michael P. & Blonigen, Bruce A. & Flynn, Joseph E., 1999. "Welfare costs of the U.S. antidumping and countervailing duty laws," Journal of International Economics, Elsevier, vol. 49(2), pages 211-244, December.
    17. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February.
    18. Harrison, Ann, 1991. "The new trade protection : price effects of antidumping and countervailing measures in the United States," Policy Research Working Paper Series 808, The World Bank.
    19. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
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