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Trade Bloc Formation Under Imperfect Competition

  • Conconi, P.

We examine the endogenous formation of trade blocs when markets are characterized by imperfect competition and governments use import tariffs and export subsidies to alter the strategic interactions between oligopolistic firms. Using a simple model of intra-industry trade between three ex-ante symmetric countries, we find that, while 'pure' customs unions - entailing tariff cooperation only - are stepping stones towards global free trade, 'impure' customs unions - involving the coordinated use of both tariffs and subsidies - are stumbling blocs against it.

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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 571.

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Length: 32 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:wrk:warwec:571
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  9. Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
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  12. M. Ayhan Kose & Raymond Riezman, 1999. "Understanding the Welfare Implications of Preferential Trade Agreements," CSGR Working papers series 45/99, Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick.
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  25. Gatsios, Konstantine & Karp, Larry, 1995. "Delegation in a general equilibrium model of customs unions," European Economic Review, Elsevier, vol. 39(2), pages 319-333, February.
  26. Dixit, Avinash, 1988. "Anti-dumping and countervailing duties under oligopoly," European Economic Review, Elsevier, vol. 32(1), pages 55-68, January.
  27. Collie, David R, 1997. "Bilateralism Is Good: Trade Blocs and Strategic Export Subsidies," Oxford Economic Papers, Oxford University Press, vol. 49(4), pages 504-20, October.
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