Trade policies, firm heterogeneity, and variable markups

• 成果类型: Article
• 署名作者: Demidova, Svetlana
• 署名单位: McMaster University
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2017.05.011
• 发表日期: 2017
• 页码: 260-273
• 关键词: Variable markups; firm heterogeneity; trade liberalization

摘要

We study unilateral trade liberalization in a model of monopolistic competition with heterogeneous firms, endogenous wages, and non-separable and non-homothetic quadratic preferences that generate variable markups. We show that the optimal level of the revenue-generating import tariff is strictly positive so that protection is always desirable, whether the liberalizing economy is large or small. Yet, reductions in cost shifting trade barriers are welfare-improving, making free trade optimal. Finally, we show that in both cases, variable markups result in negative pro-competitive effects, reducing gains from trade. (C) 2017 Elsevier B.V. All rights reserved.