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Rent Shifting and Rent Sharing: A Re-examination of the Strategic Industrial Policy Problem

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  • K. C. Fung

Abstract

This paper reexamines the market structure problem in the strategic trade policy literature. It is shown that rent sharing between the home union and the home firms raises total home industry rents regardless of whether the international duopoly is Cournot or Bertrand. Furthermore, home welfare also rises with cooperation if the international industry consists of more than two firms, if the industry is faced with entry, and if there is domestic consumption. This paper shows that rent sharing can be a robust strategic industrial policy and can be interpreted as a solution to the market structure dilemma.

Suggested Citation

  • K. C. Fung, 1995. "Rent Shifting and Rent Sharing: A Re-examination of the Strategic Industrial Policy Problem," Canadian Journal of Economics, Canadian Economics Association, vol. 28(2), pages 450-462, May.
  • Handle: RePEc:cje:issued:v:28:y:1995:i:2:p:450-62
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    Cited by:

    1. Hamilton, Stephen F. & Stiegert, Kyle W., 2002. "An empirical test of the rent-shifting hypothesis: the case of state trading enterprises," Journal of International Economics, Elsevier, vol. 58(1), pages 135-157, October.
    2. Hamilton, Stephen F. & Requate, Till, 2004. "Vertical structure and strategic environmental trade policy," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 260-269, March.
    3. Volokh, Alexander, 2010. "Privatization, free riding, and industry-expanding lobbying," International Review of Law and Economics, Elsevier, vol. 30(1), pages 62-70, March.
    4. Stiegert, Kyle W. & Wang, Shinn-Shyr, 2003. "Imperfect Competition And Strategic Trade Theory: What Have We Learned," Working Papers 14589, International Agricultural Trade Research Consortium.
    5. Sonali Deraniyagala & Ben Fine, 2000. "New Trade Theory Versus Old Trade Policy: A Continuing Enigma," Working Papers 102, Department of Economics, SOAS, University of London, UK.
    6. Subhayu Bandyopadhyay & Sudeshna Bandyopadhyay, 2001. "Efficient bargaining, welfare and strategic export policy," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 10(2), pages 133-149.
    7. Reimer, Jeffrey J. & Stiegert, Kyle W., 2006. "Evidence on Imperfect Competition and Strategic Trade Theory," Staff Paper Series 498, University of Wisconsin, Agricultural and Applied Economics.
    8. Nair-Reichert, Usha & Pomery, John, 1999. "International R&D rivalry and export market shares of unionized industries: Some evidence from the US manufacturing sector," Journal of International Economics, Elsevier, vol. 49(1), pages 77-97, October.

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