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Trade Bloc Formation Under Imperfect Competition

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  • Conconi, P.

Abstract

We examine the endogenous formation of trade blocs when markets are characterized by imperfect competition and governments use import tariffs and export subsidies to alter the strategic interactions between oligopolistic firms. Using a simple model of intra-industry trade between three ex-ante symmetric countries, we find that, while 'pure' customs unions - entailing tariff cooperation only - are stepping stones towards global free trade, 'impure' customs unions - involving the coordinated use of both tariffs and subsidies - are stumbling blocs against it.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp571.pdf
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Bibliographic Info

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 571.

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Length: 32 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:wrk:warwec:571

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Keywords: COMPETITION ; TRADE ; TARIFFS;

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Cited by:
  1. Richard Baldwin, 2008. "Big-Think Regionalism: A Critical Survey," NBER Working Papers 14056, National Bureau of Economic Research, Inc.

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