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Technological Upgrading under Tariffs and Equivalent Quotas

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  • Jiunn‐rong Chiou
  • Hong Hwang
  • Chao‐cheng Mai

Abstract

This paper compares the effect of tariffs and that of equivalent quotas on the domestic firm’s production technology choice when it competes with a foreign firm in the domestic market. It is shown that under Bertrand price competition, the ranking of technology under tariff protection and quota protection is ambiguous, as it depends on the relative strength of the strategic vs output effects. The equivalent quota regime can generate a higher‐technology (implying a lower production cost) choice than the tariff regime if the strategic effect dominates the output effect. In contrast, the technology level is necessarily higher under the tariff regime than under the equivalent quota regime when the firms engage in Cournot quantity competition.

Suggested Citation

  • Jiunn‐rong Chiou & Hong Hwang & Chao‐cheng Mai, 2006. "Technological Upgrading under Tariffs and Equivalent Quotas," Review of International Economics, Wiley Blackwell, vol. 14(5), pages 849-858, November.
    • Handle: RePEc:bla:reviec:v:14:y:2006:i:5:p:849-858
    DOI: 10.1111/j.1467-9396.2006.00624.x
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    Cited by:

    1. Chen, Fang-Yueh, 2023. "Trade warfare and sanctions in vertically related markets," Economic Modelling, Elsevier, vol. 121(C).

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