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Trade policy with endogenous entry revisited

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  • Krishna, Kala
  • Tan, Ling Hui

Abstract

This paper revisits the effects of tariffs and quotas in a competitive setting where three results are thought to hold. These are: that quotas are equivalent to specific tariffs, the form of tariffs--specific or ad valorem--does not matter, and that the way in which a quota is allocated has no real effects as it only affects the allocation of rents, not their size. We show that all three of these results are false when entry/exit is endogenous. Equivalence holds only if the initial level of entry is set at the long-run level under the quota.

Suggested Citation

  • Krishna, Kala & Tan, Ling Hui, 2010. "Trade policy with endogenous entry revisited," Journal of International Economics, Elsevier, vol. 80(2), pages 271-279, March.
  • Handle: RePEc:eee:inecon:v:80:y:2010:i:2:p:271-279
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    References listed on IDEAS

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    1. Moschini, Giancarlo, 1991. "Economic issues in tariffication: an overview," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 5(2), June.
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    8. Jan Jørgensen & Philipp Schröder, 2005. "Welfare-ranking ad valorem and specific tariffs under monopolistic competition," Canadian Journal of Economics, Canadian Economics Association, vol. 38(1), pages 228-241, February.
    9. Kala Krishna, 1990. "Export Restraints With Imperfect Competition: A Selective Survey," NBER Working Papers 3244, National Bureau of Economic Research, Inc.
    10. Richard Schmalensee & Paul L. Joskow & A. Denny Ellerman & Juan Pablo Montero & Elizabeth M. Bailey, 1998. "An Interim Evaluation of Sulfur Dioxide Emissions Trading," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 53-68, Summer.
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    Cited by:

    1. Jota Ishikawa & Toshihiro Okubo, 2017. "Greenhouse-Gas Emission Controls and Firm Locations in North–South Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(4), pages 637-660, August.

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