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Endogenous Market Structures and International Trade

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  • Etro Federico

    () (Department of Economics, University Of Venice C� Foscari)

Abstract

I extend the endogenous market structures approach to international trade theory and policy. When markets are characterized by strategic interactions and endogenous entry, opening up to trade decreases the price level, and increases concentration and the production of each firm, with a positive competition effect on welfare. With endogenous entry of foreign firms in the domestic market it is optimal to set a positive import tariff decreasing in the ratio between entry costs and market size. With endogenous entry of international firms in an integrated market, the optimal subsidy to domestic production is always positive and independent from the relative size of the domestic market. Implications for multinationals engaged in FDIs, indirect trade promotion and the lobbying are also analyzed.

Suggested Citation

  • Etro Federico, 2010. "Endogenous Market Structures and International Trade," Working Papers 2010_26, Department of Economics, University of Venice "Ca' Foscari".
  • Handle: RePEc:ven:wpaper:2010_26
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    Cited by:

    1. Federico Etro, 2014. "Optimal Trade Policy under Endogenous Foreign Entry," The Economic Record, The Economic Society of Australia, vol. 90(290), pages 282-300, September.
    2. Paolo Bertoletti & Federico Etro & Ina Simonovska, 2016. "International Trade with Indirect Additivity," NBER Working Papers 21984, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Endogenous entry; gains from trade; import tariff; production subsidy;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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