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Can subsidies for MARs be procompetitive?

Author

Listed:
  • Kala Krishna
  • Suddhasatwa Roy
  • Marie Thursby

Abstract

In contrast to recent literature, we show that market access requirements (MARs) can be implemented in a procompetitive manner even in the absence of threats in related markets. By focusing on subsidies that are paid only when the requirement is met, we show that a MAR can increase aggregate output relative to free trade provided that the right set of firms is targeted. In the context of a model with multiple Japanese and U.S. firms, we show that a MAR on U.S. imports is procompetitive as long as the U.S. firms are the ones targeted to receive the subsidy. JEL Classification: F13 Est‐ce que les subventions pour promouvoir la pénétration du marchéétranger peuvent promouvoir la concurrence? Contrairement à ce qui ressort de la littérature spécialisée récente, les auteurs montrent que l'on peut mettre en place des mesures pour promouvoir la pénétration du marchéétranger de telle manière que cela promeuve la concurrence, et ce même en l'absence de menaces dans des marchés reliés. En mettant l'accent sur les subventions payées quand les objectifs de pénétration sont remplis, on montre que de telles pratiques peuvent accroîre le niveau de production par rapport à ce qu'il serait dans un monde de libre‐échange pourvu que le bon ensemble de firmes soit ciblé. Dans un modèle où coexistent plusieurs firmes américaines et japonaises, on montre que de tels efforts quand ils portent sur les importations en provenance des Etats‐Unis promeuvent la concurrence tant que ce sont les firmes américaines qui reçoivent la subvention.

Suggested Citation

  • Kala Krishna & Suddhasatwa Roy & Marie Thursby, 2001. "Can subsidies for MARs be procompetitive?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 34(1), pages 212-224, February.
  • Handle: RePEc:wly:canjec:v:34:y:2001:i:1:p:212-224
    DOI: 10.1111/0008-4085.00071
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    References listed on IDEAS

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    1. Anne O. Krueger, 1996. "The Political Economy of American Trade Policy," NBER Books, National Bureau of Economic Research, Inc, number krue96-1, January.
    2. Krishna, Kala & Morgan, John, 1998. "Implementing results-oriented trade policies: The case of the US-Japanese auto parts dispute," European Economic Review, Elsevier, vol. 42(8), pages 1443-1467, September.
    3. Krishna, Kala & Roy, Suddhasatwa & Thursby, Marie, 1998. "Implementing Market Access," Review of International Economics, Wiley Blackwell, vol. 6(4), pages 529-544, November.
      • Kala Krishna & Suddhasatwa Roy & Marie Thursby, 1996. "Implementing Market Access," NBER Working Papers 5593, National Bureau of Economic Research, Inc.
      • Krishna, K & Roy, S & Thursby, M, 1996. "Implementaing Market Access," Papers 96-003, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
      • Krishna, K & Thursby, M & Roy, S, 1996. "Implementing Market Access," Papers 96-011, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
    4. Greaney, Theresa M., 1996. "Import now! An analysis of market-share voluntary import expansions (VIEs)," Journal of International Economics, Elsevier, vol. 40(1-2), pages 149-163, February.
    5. Ethier, Wilfred J & Horn, Henrik, 1996. "Results-Oriented Trade Policy," Review of International Economics, Wiley Blackwell, vol. 4(1), pages 17-39, February.
    6. Douglas A. Irwin, 1996. "Trade Policies and the Semiconductor Industry," NBER Chapters, in: The Political Economy of American Trade Policy, pages 11-72, National Bureau of Economic Research, Inc.
    7. Douglas A. Irwin, 1994. "Managed Trade: The Case Against Import Targets," Books, American Enterprise Institute, number 51697, September.
    8. Thursby, M. & Krisna, K. & Roy, S., 1997. "Procompetitive Market Access," Papers 97-006, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
    9. Thierry Verdier, 1998. "Results-oriented versus rules-oriented trade policies:: A theoretical survey," European Economic Review, Elsevier, vol. 42(3-5), pages 733-744, May.
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    Cited by:

    1. Qiu, Larry D. & Spencer, Barbara J., 2002. "Keiretsu and relationship-specific investment: implications for market-opening trade policy," Journal of International Economics, Elsevier, vol. 58(1), pages 49-79, October.
    2. Jan Bouckaert & Bruno De Borger, 2013. "Price competition between subsidized organizations," Journal of Economics, Springer, vol. 109(2), pages 117-145, June.

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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