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Can Subsidies for MARs be Procompetitive?

  • Kala Krishna
  • Suddhasatwa Roy
  • Marie C. Thursby

In contrast to recent literature, we show that market access requirements (MARs) can be implemented in a procompetitive manner even in the absence of threats in related markets. By focusing on subsidies that are paid only when the requirement is met, we show that a MAR can increase aggregate output relative to free trade provided that the right set of firms is targeted. In the context of a model with multiple Japanese and US firms, we show that a MAR on US imports is procompetitive as long as the US firms are the ones targeted to receive the subsidy.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7624.

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Date of creation: Mar 2000
Date of revision:
Publication status: published as Canadian Journal of Economics, Volume: 34 Issue: 1 (February 2001) Pages: 212-224
Handle: RePEc:nbr:nberwo:7624
Note: ITI
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. 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.
  2. Douglas A. Irwin, 1996. "Trade Policies and the Semiconductor Industry," NBER Chapters, in: The Political Economy of American Trade Policy, pages 11-72 National Bureau of Economic Research, Inc.
  3. Thierry Verdier, 1998. "Results-oriented versus rules-oriented trade policies:: A theoretical survey," European Economic Review, Elsevier, vol. 42(3-5), pages 733-744, May.
  4. 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).
  5. 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.
  6. Douglas A. Irwin, 1994. "Trade Politics and the Semi-conductor Industry," University of Chicago - George G. Stigler Center for Study of Economy and State 92, Chicago - Center for Study of Economy and State.
  7. Kala Krishna & Suddhasatwa Roy & Marie Thursby, 1997. "Procompetitive Market Access," NBER Working Papers 6184, National Bureau of Economic Research, Inc.
  8. Ethier, W.J. & Horn, H., 1993. "Results-Oriented Trade Policy," ISER Discussion Paper 0304, Institute of Social and Economic Research, Osaka University.
  9. Douglas A. Irwin, 1994. "Managed Trade," Books, American Enterprise Institute, number 51697, 2.
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