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Tariff (De‐) Escalation with Successive Oligopoly

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  • Steve McCorriston
  • Ian Sheldon

Abstract

In this paper, we explore the issue of a simultaneous reduction in tariffs at different stages of a vertically-related market where each stage is oligopolistic. When vertically-related markets are characterized as a successive oligopoly, reducing tariffs by an equivalent amount on upstream and downstream imports will have a differential effect on market access and hence profits at each stage due to a combination of horizontal and vertical effects. As a consequence, in order to maintain parity between the upstream and downstream stages in terms of changes in domestic firms’ profits, tariffs on downstream imports should be reduced proportionately more than tariffs on upstream imports. This provides a rationale for tariff-reduction formulae aimed at reducing tariff escalation.
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  • Steve McCorriston & Ian Sheldon, 2011. "Tariff (De‐) Escalation with Successive Oligopoly," Review of Development Economics, Wiley Blackwell, vol. 15(4), pages 587-600, November.
    • Handle: RePEc:bla:rdevec:v:15:y:2011:i:4:p:587-600
    DOI: j.1467-9361.2011.00629.x
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    References listed on IDEAS

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    1. David Greenaway & Chris Milner, 2003. "Effective Protection, Policy Appraisal and Trade Policy Reform," The World Economy, Wiley Blackwell, vol. 26(4), pages 441-456, April.
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    Cited by:

    1. Ian M. Sheldon, 2021. "Reflections on a Career as an Industrial Organization and International Economist," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(2), pages 468-499, June.
    2. Hong Hwang & Chao†Cheng Mai & Shih†Jye Wu, 2017. "Tariff Escalation and Vertical Market Structure," The World Economy, Wiley Blackwell, vol. 40(8), pages 1597-1613, August.
    3. Nenci, Silvia & Fusacchia, Ilaria & Giunta, Anna & Montalbano, Pierluigi & Pietrobelli, Carlo, 2022. "Mapping global value chain participation and positioning in agriculture and food: stylised facts, empirical evidence and critical issues," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 11(2), July.
    4. Zamani, Omid & Chibanda, Craig & Pelikan, Janine, 2021. "Investigating Alternative Poultry Trade Policies in the Context of African Countries: Evidence from Ghana," 2021 Conference, August 17-31, 2021, Virtual 315173, International Association of Agricultural Economists.
    5. Zamani, Omid & Chibanda, Craig & Pelikan, Janine, 2020. "Tariff Escalation and Import Bans in the Economic Partnership Agreement between the EU and West Africa," Conference papers 333239, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Masayuki Okawa & Tatsuya Iguchi, 2016. "Welfare-improving Coordinated Tariff and Sales Tax Reforms under Imperfect Competition," Review of Development Economics, Wiley Blackwell, vol. 20(2), pages 475-487, May.
    7. Badri Narayanan, G. & Khorana, Sangeetha, 2014. "Tariff escalation, export shares and economy-wide welfare: A computable general equilibrium approach," Economic Modelling, Elsevier, vol. 41(C), pages 109-118.
    8. Aditya Bhattacharjea & Kanika Pathania & Uday Bhanu Sinha, 2022. "Duty Inversion and Effective Protection: A Theoretical Analysis," Working papers 330, Centre for Development Economics, Delhi School of Economics.
    9. Ian M. Sheldon & Steve McCorriston, 2009. "Tariff De-escalation with successive oligopoly: Implications for developing country market access," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 6(1), pages 59-64, Julio - D.
    10. Pol Antràs & Teresa C. Fort & Agustín Gutiérrez & Felix Tintelnot, 2022. "Trade Policy and Global Sourcing: An Efficiency Rationale for Tariff Escalation," NBER Working Papers 30225, National Bureau of Economic Research, Inc.
    11. Sheldon, Ian M. & McCorriston, Steve, 2023. "Vertical Markets, Carbon Border Tax Adjustments and ‘Dirty Inputs’," 2023 Annual Meeting, July 23-25, Washington D.C. 335697, Agricultural and Applied Economics Association.

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