Abstract

http://ssrn.com/abstract=1736763
 
 

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Cost Asymmetry, Oligopolistic Competition, and Optimal Trade and Industrial Policies


Winston W. Chang


State University of New York at Buffalo - Department of Economics

Hajime Sugeta


Kansai University - Faculty of Economics

May 1, 2004

International Economic Journal, Vol. 19, No. 1, pp. 95-114, March 2005

Abstract:     
Optimal trade and industrial policies are examined in an export-rivalry and a home-market model with general cost heterogeneity among firms. The roles of the demand and cost structures in policy determination are systematically analyzed. It is shown that the equal-markup property holds in both models under the firm-specific industrial policy. A more efficient firm has a higher subsidy or a lower tax rate than an inefficient one. In the home market model under free trade, the firm-specific industrial policy always calls for subsidies to all home firms. Under the firm-specific trade policy, it is shown that the difference between any two tariff rates exactly equals 100% of the difference between the foreign firms' marginal costs, the home industry is always granted some positive level of protection, and a production-tax-cum-import-subsidy policy is never optimal.

Number of Pages in PDF File: 20

Keywords: Cost Asymmetry, Trade and Industrial Policies

JEL Classification: F12, F13, L13

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Date posted: January 9, 2011  

Suggested Citation

Chang, Winston W. and Sugeta, Hajime, Cost Asymmetry, Oligopolistic Competition, and Optimal Trade and Industrial Policies (May 1, 2004). International Economic Journal, Vol. 19, No. 1, pp. 95-114, March 2005. Available at SSRN: http://ssrn.com/abstract=1736763

Contact Information

Winston W. Chang (Contact Author)
State University of New York at Buffalo - Department of Economics ( email )
453 Fronczak Hall
Department of Economics, SUNY at Buffalo
Buffalo, NY 14260
United States
716-645-2121 (Phone)
716-645-2127 (Fax)
HOME PAGE: http://www.economics.buffalo.edu/people/faculty/chang/
Hajime Sugeta
Kansai University - Faculty of Economics ( email )
3-3-35 Yamatecho
Suita, Osaka, 564-8680
Japan
81-6-6368-1121 (Phone)
81-6-6339-7704 (Fax)
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