Government policies in a granular global economy

Cecile Gaubert, Oleg Itskhoki and Maximilian Vogler

Journal of Monetary Economics, 2021, vol. 121, issue C, 95-112

Abstract: Using a granular model of international trade, we study the rationale and implications of various government interventions targeted at large individual firms. In antitrust regulation, governments face an incentive to be overly lenient towards domestic mergers in comparative advantage sectors. In trade policy, targeting individual foreign exporters rather than entire sectors minimizes the pass-through of import tariffs into domestic consumer prices, shifting the burden towards foreign producers. In industrial policy, subsidizing ‘national champions’ is generally suboptimal in closed economies as it leads to an excessive build-up of market power, yet it may become unilaterally welfare improving in open economies at the cost of the foreign consumers.

Keywords: Granular comparative advantage; Industrial policy; Trade policy; Antitrust (search for similar items in EconPapers)
JEL-codes: D43 F12 F13 L40 L52 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Government Policies in a Granular Global Economy (2021)
Working Paper: Government Policies in a Granular Global Economy (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:121:y:2021:i:c:p:95-112

DOI: 10.1016/j.jmoneco.2021.04.003

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