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Procompetitive Market Access

Author

Listed:
  • Kala Krishna
  • Suddhasatwa Roy
  • Marie Thursby

Abstract

The view that U.S. businesses are being unfairly hurt by barriers to access in foreign markets has raised demands for market access requirements (MARs) from within U.S. industry and government alike. We show that, contrary to the prevailing wisdom of the recent literature, MARs can be implemented in a procompetitive manner. The basic idea is that the requirement must be implemented in a way that provides the right incentives for increasing aggregate output or lowering prices. We provide two examples to illustrate this point. In the context of a Cournot duopoly, we show that an implementation scheme in which the U.S. firm receives a pre-announced subsidy if the market share target is met leads to increased aggregate output. In a second example, we show that a MAR on an imported intermediate input can lead not only to increased imports of the intermediate good, but also to increased output in the final good market using the input. The intuition is that increasing output of the final good helps to make the MAR less binding and this reduces the marginal cost of production in the final good market. Thus our results buttress the point made in Krishna, Roy and Thursby (1997) that the effects of MARs depend crucially on the details of their implementation.

Suggested Citation

  • Kala Krishna & Suddhasatwa Roy & Marie Thursby, 1997. "Procompetitive Market Access," NBER Working Papers 6184, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:6184
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    File URL: http://www.nber.org/papers/w6184.pdf
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    Other versions of this item:

    • 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).

    References listed on IDEAS

    as
    1. Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
    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.
      • 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).
      • 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).
      • Kala Krishna & Suddhasatwa Roy & Marie Thursby, 1996. "Implementing Market Access," NBER Working Papers 5593, National Bureau of Economic Research, Inc.
    4. Douglas A. Irwin, 1994. "Managed Trade: The Case Against Import Targets," Books, American Enterprise Institute, number 51697.
    5. 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.
    6. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
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    Citations

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    Cited by:

    1. Krishna, Kala & Roy, Suddhasatwa & Thursby, Marie, 1998. "Implementing Market Access," Review of International Economics, Wiley Blackwell, vol. 6(4), pages 529-544, November.
      • 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).
      • 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).
      • Kala Krishna & Suddhasatwa Roy & Marie Thursby, 1996. "Implementing Market Access," NBER Working Papers 5593, National Bureau of Economic Research, Inc.
    2. Kala Krishna & Suddhasatwa Roy & Marie Thursby, 2001. "Can subsidies for MARs be procompetitive?," Canadian Journal of Economics, Canadian Economics Association, vol. 34(1), pages 212-224, February.

    More about this item

    JEL classification:

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

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