Can Subsidies for MARs be Procompetitive?
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.
|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|
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