Trade Policy and Industrial Structure

Facundo Albornoz () and Paolo Vanin ()

No 05-12R, Discussion Papers from Department of Economics, University of Birmingham

Abstract: In a small open economy with heterogeneous firms, in which tariffs determine the mass of active firms, the gains from trade liberalization depend positively on the level of firm vertical heterogeneity and negatively on transportation costs. The benefits from temporary protection depend on the level of backwardness: for a given mass of backward firms, the relative gains from protection increase with their quality and decrease with the quality of advanced firms; for given production quality levels, the relative advantage of protection increases with the mass of backward firms.

Keywords: Trade policy; Production network; Learning externalities; Infant Industry (search for similar items in EconPapers)
JEL-codes: D51 D62 F12 F13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: Written
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