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A general framework for analysing endogenous trade divergences

Author

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  • Walsh, Patrick

Abstract

This paper gives a general framework for analysing a trade divergence that runs across both the New International trade theory and the traditional analysis of export policy. The source of the trade divergence, the motive for intervention and the analytical framework is shown to be the same in all models. The sign of the trade divergence and hence the policy recommendation is determined by the market structure chosen to endogenise the divergence. The magnitude of the subsidy in all models is determined by the maximum potential profitability of the home industry. It is argued that interpretations based on ?profit shifting? or on a ?terms of trade improvement? as a motive for trade intervention are misleading.

Suggested Citation

  • Walsh, Patrick, 1991. "A general framework for analysing endogenous trade divergences," LSE Research Online Documents on Economics 6780, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:6780
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    File URL: https://researchonline.lse.ac.uk/id/eprint/6780/
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    Cited by:

    1. is not listed on IDEAS
    2. John Sutton, 2001. "Rich Trades, Scarce Capabilities: Industrial Development Revisited," STICERD - Economics of Industry Papers 28, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.

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    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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