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Strategic Trade Policy With Domestic Cost Asymmetries


  • Leahy, D.
  • Montagna, C.


In this paper we examine optimal strategic trade p[olicy under oligopoly with many home and foreign firms when the firms have different levels of efficiency and where a trade-off exists between the subsidy bill and firms profits. The first-best policy involves a structure of firm specific export subsidies and export taxes in which the government favours the most efficient firms unless the social cost of funds is sufficiently high. Whenoptimal policy is constrained to a uniform subsidy the optimal policy depends on the relative number of home and foreign firms and the curvature of demnand. Deficiencies of the uniform subsidies are examined.

Suggested Citation

  • Leahy, D. & Montagna, C., 1997. "Strategic Trade Policy With Domestic Cost Asymmetries," Papers 97/27, College Dublin, Department of Political Economy-.
  • Handle: RePEc:fth:dublec:97/27

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    References listed on IDEAS

    1. Colm Harmon; & Ian Walker, 1995. "Estimates of Economic Return to Schooling in the UK," Economics, Finance and Accounting Department Working Paper Series n540195, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
    2. Callan, Tim & Wren, Anne, 1994. "Male-Female Wage Differentials: Analysis and Policy Issues," Research Series, Economic and Social Research Institute (ESRI), number GRS163.
    3. Callan, Tim & Nolan, Brian & Whelan, Brendan J. & Hannan, Damian F. & Creighton, S., 1989. "Poverty, Income and Welfare in Ireland," Research Series, Economic and Social Research Institute (ESRI), number GRS146.
    4. Harmon, Harmon & Ian Walker, 1995. "Estimates of the economic return to schooling for the UK," IFS Working Papers W95/12, Institute for Fiscal Studies.
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    Cited by:

    1. Erling Holm√ły, 2003. "Aggregate Industry Behaviour in a Monopolistic Competition Model with Heterogeneous Firms," Discussion Papers 352, Statistics Norway, Research Department.
    2. Ngo Van Long & Antoine Soubeyran, 2003. "A Theory of Favoritism under International Oligopoly," CIRANO Working Papers 2003s-15, CIRANO.

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    JEL classification:

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


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