Trade policy: Home market effect versus terms-of-trade externality

• 成果类型: Article
• 署名作者: Campolmi, Alessia; Fadinger, Harald; Forlati, Chiara
• 署名单位: Central European University; University of Vienna; Swiss Federal Institutes of Technology Domain; Ecole Polytechnique Federale de Lausanne
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2013.12.010
• 发表日期: 2014
• 页码: 92-107
• 关键词: Home market effect; Terms of trade; Tariffs and subsidies

摘要

We study trade policy in a two-sector Krugman (1980) trade model, allowing for wage, import and export subsidies/taxes. We study non-cooperative trade policies, first for each individual instrument and then for the situation where all instruments can be set simultaneously, and contrast those with the efficient allocation. We show that in this general context there are four motives for non-cooperative trade policies: the correction of monopolistic distortions; the terms-of-trade manipulation; the delocation motive for protection (home market effect); the fiscal-burden-shifting motive. The Nash equilibrium when all instruments are available is characterized by first-best-level wage subsidies, and inefficient import subsidies and export taxes, which aim at relocating firms to the other economy and improving terms of trade. Thus, the dominating incentives for non-cooperative trade policies are the fiscal-burden-shifting motives and terms-of-trade effects. (C) 2014 Elsevier B.V. All rights reserved.