Optimal Trade Policy for Opening Markets
UCSC Dept. of Economics WP 376
Posted: 5 Sep 1997
Date Written: June 1997
Developing and Eastern European countries recently started opening their economies. We analyze how the opening to international trade can be accompanied by strategic trade policy if the resulting market structure is oligopolistic. We find that for reasonable parameter values, a tariff is the optimal policy tool. Furthermore, tariffs and quotas are not welfare equivalent in our model.
JEL Classification: F12, F13, O20
Suggested Citation: Suggested Citation