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Trade Bloc Formation Under Imperfect Competition

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  • Conconi, Paola

Abstract

We examine the endogenous formation of trade blocs when markets are characterized by imperfect competition and governments use import tari¤s and export subsidies to alter the strategic interaction between oligopolistic …rms. Using a simple model of intra-industry trade between three ex-ante symmetric countries, we …nd that, while ‘pure’ customs unions—entailing tari¤ cooperation only—are stepping stones towards global free trade, ‘impure’ customs unions— involving the coordinated use of both tari¤s and subsidies—are stumbling blocs against it. Our analysis suggests that an international ban on export subsidies could help to sustain global free trade

Suggested Citation

  • Conconi, Paola, 2000. "Trade Bloc Formation Under Imperfect Competition," Economic Research Papers 269342, University of Warwick - Department of Economics.
  • Handle: RePEc:ags:uwarer:269342
    DOI: 10.22004/ag.econ.269342
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    More about this item

    Keywords

    Agricultural and Food Policy; International Relations/Trade;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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