Free entry and regulatory competition in a global economy

Kaz Miyagiwa () and Yasuhiro Sato

Journal of Public Economics, 2014, vol. 118, issue C, 1-14

Abstract: This paper examines the optimal entry policy toward oligopoly in a global economy. We show that free entry results in too much competition for the world, but each country's corrective tax policy, unless internationally coordinated, proves suboptimal because of international policy spillovers. Thus, globalization prevents countries from pursuing the optimal entry policy. However, globalization also generates the gains from trade. When countries are small, the gains from trade dominate the losses from a suboptimal entry policy, but as markets grow the result is reversed, making trade inferior to autarky. Therefore, the need for tax harmonization grows as the world economy grows. This paper also contributes to the international tax competition literature through the discovery of the reverse home market effect.

Keywords: Entry policy; Excessive entry; Globalization; Regulatory competition (search for similar items in EconPapers)
JEL-codes: F15 H21 H77 L13 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272714001455
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:118:y:2014:i:c:p:1-14

DOI: 10.1016/j.jpubeco.2014.06.005

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().