 Delocation and trade agreements in imperfectly competitive marketsKyle Bagwell and Robert Staiger Research in Economics, 2015, vol. 69, issue 2, 132-156 Abstract: We consider the purpose and design of trade agreements in imperfectly competitive environments featuring firm-delocation effects. In both the segmented-market Cournot and the integrated-market monopolistic competition settings where these effects have been identified, we show that the only rationale for a trade agreement is to remedy the inefficiency attributable to the terms-of-trade externality, the same rationale that arises in perfectly competitive markets. Furthermore, and again as in the perfectly competitive benchmark case, we show that the principle of reciprocity is efficiency enhancing, as it serves to “undo” the terms-of-trade driven inefficiency that occurs when governments pursue unilateral trade policies. Our results therefore indicate that the terms-of-trade theory of trade agreements applies to a broader set of market structures than previously thought. Keywords: Strategic trade policy; Firm-delocation; Endogenous market structures; Import tariffs; Export subsidies (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:69:y:2015:i:2:p:132-156 DOI: 10.1016/j.rie.2015.01.001 Access Statistics for this article Research in Economics is currently edited by Federico Etro More articles in Research in Economics from Elsevier |
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