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Strategic trade policy : how new? how sensible?


  • Corden, W. Max


This paper reviews some recent developments in the theory of trade policy that have to do with imperfect competition, strategic interactions as a result of oligopoly, and economies of scale. All these developments have been described as the"new international economics."In the view of some they represent major breakthroughs. One purpose of this paper is to examine how new some of this is and how it relates to the orthodox theory. The paper will focus on one major aspect of these developments, namely"Brander-Spencer profit sharing"and its policy implications. The conclusion is that it relates closely to the existing framework of the orthodox theory of trade policy.

Suggested Citation

  • Corden, W. Max, 1990. "Strategic trade policy : how new? how sensible?," Policy Research Working Paper Series 396, The World Bank.
  • Handle: RePEc:wbk:wbrwps:396

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    References listed on IDEAS

    1. Katrak, Homi, 1977. "Multi-national Monopolies and Commercial Policy," Oxford Economic Papers, Oxford University Press, vol. 29(2), pages 283-291, July.
    2. James A. Brander & Barbara J. Spencer, 1981. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Canadian Journal of Economics, Canadian Economics Association, vol. 14(3), pages 371-389, August.
    3. Paul Krugman, 1986. "Strategic Trade Policy and the New International Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610450, January.
    4. Barbara J. Spencer & James A. Brander, 1983. "International R & D Rivalry and Industrial Strategy," Review of Economic Studies, Oxford University Press, vol. 50(4), pages 707-722.
    5. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 383-406.
    6. Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
    7. Stegemann, Klaus, 1989. "Policy rivalry among industrial states: what can we learn from models of strategic trade policy?," International Organization, Cambridge University Press, vol. 43(01), pages 73-100, December.
    8. Svedberg, Peter, 1979. "Optimal Tariff Policy on Imports from Multinationals," The Economic Record, The Economic Society of Australia, vol. 55(148), pages 64-67, March.
    9. Krugman, Paul R, 1987. "Is Free Trade Passe?," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 131-144, Fall.
    10. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
    11. Pursell, G. & Snape, R. H., 1973. "Economies of scale, price discrimination and exporting," Journal of International Economics, Elsevier, vol. 3(1), pages 85-91, February.
    12. Snape, Richard H, 1977. "Trade Policy in the Presence of Economies of Scale and Product Variety," The Economic Record, The Economic Society of Australia, vol. 53(144), pages 525-534, December.
    13. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
    14. T. N. Srinivasan, 1989. "Recent Theories of Imperfect Competition and International Trade: Any Implications for Development Strategy?," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 24(1), pages 1-23, July.
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    Cited by:

    1. Douglas A. Irwin, 1990. "Free trade at risk? An historical perspective," International Finance Discussion Papers 391, Board of Governors of the Federal Reserve System (U.S.).
    2. Corbo, Vittorio & Fischer, Stanley, 1991. "Adjustment programs and Bank support : rationale and main results," Policy Research Working Paper Series 582, The World Bank.
    3. Asad Alam, 1995. "The New Trade Theory and its Relevance to the Trade Policies of Developing Countries," The World Economy, Wiley Blackwell, vol. 18(3), pages 367-385, May.
    4. Dani Rodrik, 1993. "Trade and Industrial Policy Reform in Developing Countries: A Review of Recent Theory and Evidence," NBER Working Papers 4417, National Bureau of Economic Research, Inc.
    5. Walsh, Patrick, 1991. "A general framework for analysing endogenous trade divergences," LSE Research Online Documents on Economics 6780, London School of Economics and Political Science, LSE Library.
    6. Alam, Asad & DEC, 1994. "The new trade theory and its relevance for developing countries," Policy Research Working Paper Series 1274, The World Bank.


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