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Free Entry, Regulatory Competition, and Globalization

41 Pages Posted: 14 Mar 2012  

Kaz Miyagiwa

Emory University - Department of Economics; Osaka University - Institute of Social and Economic Research (ISER); Florida International University (FIU) - Department of Economics

Yasuhiro Sato

Osaka University - Graduate School of Economics

Date Written: March 7, 2012

Abstract

This paper examines the optimal entry policy towards oligopoly in a globalized world. In an open economy free entry is socially suboptimal, but corrective tax policy to curb entry proves insufficient unless internationally harmonized. Thus, while conferring the gains from trade, globalization prevents countries from pursuing the optimal entry policy. When countries are small, the gains from trade dominate the losses from a suboptimal entry policy, but as markets grow the result is reversed, making trade inferior to autarky. Therefore, the need for tax harmonization grows as the world economy grows. This paper also contributes to the international tax competition literature through the discovery of the reverse home market effect.

Keywords: entry policy, excessive entry, globalization, regulatory competition

JEL Classification: F15, H21, H77, L13

Suggested Citation

Miyagiwa, Kaz and Sato, Yasuhiro, Free Entry, Regulatory Competition, and Globalization (March 7, 2012). ISER Discussion Paper No. 835. Available at SSRN: https://ssrn.com/abstract=2017332 or http://dx.doi.org/10.2139/ssrn.2017332

Kaz Miyagiwa (Contact Author)

Emory University - Department of Economics ( email )

1602 Fishburne Drive
Atlanta, GA 30322
United States

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki Osaka 567-0047
Japan

Florida International University (FIU) - Department of Economics ( email )

Miami, FL 33199
United States

Yasuhiro Sato

Osaka University - Graduate School of Economics ( email )

1-7 Machikaneyama
Toyonaka, Osaka, 560-0043
Japan

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