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Trade costs and the timing of competition policy adoption


  • Rikard Forslid
  • Jonas Häckner
  • Astri Muren


This paper first presents stylized evidence showing how the date of the adoption of competition policy is correlated with country size. Smaller countries tend to adopt competition policy later. We then present a theoretical model with countries of different size, trade costs, and firms competing à la Cournot. In the model we show that reduced trade costs following from increasing globalization affect countries differently depending on their size. This has implications for the incentives to introduce competition policy. The predictions of the model are consistent with the empirical regularity presented.

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  • Rikard Forslid & Jonas Häckner & Astri Muren, 2011. "Trade costs and the timing of competition policy adoption," Canadian Journal of Economics, Canadian Economics Association, vol. 44(1), pages 171-200, February.
  • Handle: RePEc:cje:issued:v:44:y:2011:i:1:p:171-200

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    References listed on IDEAS

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)


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