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Strategic Export Policy in the Presence of Subcontracting

Author

Listed:
  • Chen, Ho-Chyuan

    () (National Kaohsiung First University of Science and Technology)

  • Liang, Wen-Jung

    (Tamkang University)

Abstract

This paper examines the optimal export policies when ex ante negotiation over subcontract manufacturing occurs between two competing international-firms. It show that it could be optimal for the exporting country to adopt either a different or a parallel trade policy between the two exporting goods (the final product and the subcontracted product). However, a different trade policy that taxes the finalproduct export and subsidizes the subcontracted-product export is not ever optimal. When the exporting firm is a pure subcontractor, taxing the single export (subcontracted product) becomes the only optimal trade policy of the exporting country. Morever, the exporting country imposes a less aggressive trade policy in response given that the importing country inflicts a more aggressive trade policy.

Suggested Citation

  • Chen, Ho-Chyuan & Liang, Wen-Jung, 2007. "Strategic Export Policy in the Presence of Subcontracting," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 22, pages 973-994.
  • Handle: RePEc:ris:integr:0420
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    References listed on IDEAS

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    More about this item

    Keywords

    Subcontracting; International Trade; Nash Bargaining; Trade Policy;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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