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Economic geography with tariff competition


  • Mai, Chao-Cheng
  • Peng, Shin-Kun
  • Tabuchi, Takatoshi


A simple two-country model of economic geography is constructed in order to examine the effect of tariff competition on the spatial distribution of manufacturing activities as well as on welfare. We show that when the transport cost is small, tariff competition with firm migration leads to a core-periphery economy, where one of the two countries imposes no tariff in Nash equilibrium. We also show that when the transport cost is sufficiently large, both countries impose a positive tariff, which decreases the welfare of both countries.

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  • Mai, Chao-Cheng & Peng, Shin-Kun & Tabuchi, Takatoshi, 2008. "Economic geography with tariff competition," Regional Science and Urban Economics, Elsevier, vol. 38(5), pages 478-486, September.
  • Handle: RePEc:eee:regeco:v:38:y:2008:i:5:p:478-486

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    References listed on IDEAS

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    5. Takatoshi Tabuchi & Kristian Behrens & Andrea R. Lamorgese, 2004. "Testing the Home Market Effects in a Multi-country World: The Theory," Econometric Society 2004 Far Eastern Meetings 595, Econometric Society.
    6. Frankel, Jeffrey & Stein, Ernesto & Wei, Shang-jin, 1995. "Trading blocs and the Americas: The natural, the unnatural, and the super-natural," Journal of Development Economics, Elsevier, vol. 47(1), pages 61-95, June.
    7. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    8. Gros, Daniel, 1987. "A note on the optimal tariff, retaliation and the welfare loss from tariff wars in a framework with intra-industry trade," Journal of International Economics, Elsevier, vol. 23(3-4), pages 357-367, November.
    9. BEHRENS, Kristian & LAMORGESE, Andrea R. & OTTAVIANO, Gianmarco I.P. & TABUCHI, Takatoshi, 2005. "Testing the ‘home market effect’ in a multi-country world," CORE Discussion Papers 2005055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    10. Blonigen, Bruce A., 2002. "Tariff-jumping antidumping duties," Journal of International Economics, Elsevier, vol. 57(1), pages 31-49, June.
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    12. Konishi, Hideo & Saggi, Kamal & Weber, Shlomo, 1999. "Endogenous trade policy under foreign direct investment," Journal of International Economics, Elsevier, vol. 49(2), pages 289-308, December.
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    Cited by:

    1. Takatsuka, Hajime & Zeng, Dao-Zhi, 2016. "Nontariff protection without an outside good," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 65-78.
    2. Oyama, Daisuke, 2009. "Agglomeration under forward-looking expectations: Potentials and global stability," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 696-713, November.
    3. María Pilar Martínez-García & Jose Rodolfo Morales, 2016. "Resource effects in the Core-Periphery model," Gecomplexity Discussion Paper Series 201607, Action IS1104 "The EU in the new complex geography of economic systems: models, tools and policy evaluation", revised Jul 2016.

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