Trade Policy and Industrial Structure

47 Pages Posted: 20 Sep 2007

See all articles by Facundo Albornoz

Facundo Albornoz

University of Birmingham

Paolo Vanin

University of Bologna - Department of Economics

Date Written: September 7, 2007


In a small open economy with heterogeneous firms, in which tariffs determine the mass of active firms, the gains from trade liberalization depend positively on the level of firm vertical heterogeneity and negatively on transportation costs. The benefits from temporary protection depend on the level of backwardness: for a given mass of backward firms, the relative gains from protection increase with their quality and decrease with the quality of advanced firms; for given production quality levels, the relative advantage of protection increases with the mass of backward firms.

Keywords: Trade policy, Production network, Learning externalities, Infant industry

JEL Classification: D51, D62, F12, F13

Suggested Citation

Albornoz, Facundo and Vanin, Paolo, Trade Policy and Industrial Structure (September 7, 2007). Available at SSRN: or

Facundo Albornoz (Contact Author)

University of Birmingham ( email )

Economics Department
Birmingham, B15 2TT
United Kingdom

Paolo Vanin

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, BO 40126
+39-0512098120 (Phone)
+39-0512098040 (Fax)

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