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The Tariff‐Jumping Argument and Location Theory

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  • Hong Hwang
  • Chao‐cheng Mai

Abstract

When examining the tariff‐jumping effect, the literature emphasizes the cost‐induced effect, which states that a foreign firm has an incentive to jump over the tariff wall in order to locate in a foreign territory, and thereby escape tariffs. The authors set up a location model to show what they refer to as the location‐induced effect on tariff‐jumping. This location‐induced effect, together with the traditional cost‐induced effect, makes tariff‐jumping more (less) likely to take place when the production function in question exhibits decreasing (increasing) returns to scale.

Suggested Citation

  • Hong Hwang & Chao‐cheng Mai, 2002. "The Tariff‐Jumping Argument and Location Theory," Review of International Economics, Wiley Blackwell, vol. 10(2), pages 361-368, May.
    • Handle: RePEc:bla:reviec:v:10:y:2002:i:2:p:361-368
    DOI: 10.1111/1467-9396.00337
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    Cited by:

    1. Almenar-Llongo, Vicent & Muñoz de Prat, Javier & Orero-Blat, Maria, 2021. "Qualitative analysis for joint ventures as an entry mode in foreign direct investment," Journal of Business Research, Elsevier, vol. 123(C), pages 324-332.

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