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Wasteful Trade Barriers in Oligopoly

Author

Listed:
  • Kamei, Keita
  • Inomata, Kentaro

Abstract

Trade barriers can exist variably and are not just limited to tariffs. Based on a bilateral trade model under international oligopolistic competition, we show that governments endogenously determine red-tape barriers (RTBs), which are trade barriers caused by wasteful administrative procedures. We also find that RTBs can have the opposite reaction to tariffs. Particularly, we find that the fall in the RTB level can be larger than the rise in tariffs (backlash effects). Finally, in the case of a coordinated tariff rate increase under a free trade agreement between the two countries, it is shown that an increase in tariffs can improve consumer surplus, producer surplus, and government income and expenditure.

Suggested Citation

  • Kamei, Keita & Inomata, Kentaro, 2022. "Wasteful Trade Barriers in Oligopoly," MPRA Paper 114541, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:114541
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    References listed on IDEAS

    as
    1. Hillman, Arye L, 1984. "Declining Industries and Political-Support Protectionist Motives: Errata," American Economic Review, American Economic Association, vol. 74(1), pages 260-260, March.
    2. Baldwin, Richard, 1987. "Politically realistic objective functions and trade policy PROFs and tariffs," Economics Letters, Elsevier, vol. 24(3), pages 287-290.
    3. Giovanni Maggi & Monika Mrázová & J. Peter Neary, 2022. "Choked By Red Tape? The Political Economy Of Wasteful Trade Barriers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(1), pages 161-188, February.
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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F19 - International Economics - - Trade - - - Other

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