Trade Bloc Formation Under Imperfect Competition

Paola Conconi ()

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: We examine the endogenous formation of trade blocs when markets are characterized by imperfect competition and governments use import tariffs and export subsidies to alter the strategic interactions between oligopolistic firms. Using a simple model of intra-industry trade between three ex-ante symmetric countries, we find that, while 'pure' customs unions - entailing tariff cooperation only - are stepping stones towards global free trade, 'impure' customs unions - involving the coordinated use of both tariffs and subsidies - are stumbling blocs against it.

Keywords: COMPETITION; TRADE; TARIFFS (search for similar items in EconPapers)
JEL-codes: F12 F13 L13 L50 (search for similar items in EconPapers)
Date: 2000
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Persistent link: http://EconPapers.repec.org/RePEc:wrk:warwec:571

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