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Protection for Sale, Monopolistic Competition and Variable Markups

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  • Enrico Marvasi

    (Università degli Studi di Firenze)

Abstract

We extend the basic model of trade protection with special interest groups developed in Grossman and Helpman (1994) to include monopolistic competition with variable markups. We find the following results: (i) for sectors organized into lobbies the endogenous import tariff is always positive and inversely related to the degree of import penetration; (ii) for unorganized sectors the endogenous import policy may be a tariff or a subsidy, depending on the policy implemented by the partner country; (iii) the endogenous export policy consists in an export tax for unorganized sectors and in a subsidy for organized sector provided that goods are suciently differentiated.

Suggested Citation

  • Enrico Marvasi, 2013. "Protection for Sale, Monopolistic Competition and Variable Markups," Working Papers - Economics wp2013_11.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    • Handle: RePEc:frz:wpaper:wp2013_11.rdf
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    More about this item

    Keywords

    Endogenous Trade Policy; Protection for Sale; Monopolistic Competition; Variable Markups.;
    All these keywords.

    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

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