Why are Countervailing Duties Imposed? The Firms’ Viewpoint
Ming Chuan University - Department of Economics
October 14, 2009
This paper studies the relationship between firms’ profits and countervailing duties in vertically related markets characterized by oligopolies. It is shown that a countervailing duty equal to the foreign export subsidy is required to neutralize the impact of foreign export subsidies on the domestic firms’ profits. The domestic country has an incentive to impose a countervailing duty on the foreign final good even though the foreign government only subsidizes exports of the intermediate good. Additionally, the foreign exporting firms may benefit from a countervailing duty more than a foreign export subsidy.
Number of Pages in PDF File: 15
Keywords: profits, countervailing duties, vertically related markets
JEL Classification: F12, F13, L13working papers series
Date posted: October 11, 2009 ; Last revised: October 16, 2009
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo3 in 0.453 seconds