 Strategic trade policy in general oligopolistic equilibrium: The case of import tariffsResearch in Economics, 2024, vol. 78, issue 2 Abstract: In a two-country model of general oligopolistic equilibrium with technologically heterogeneous sectors, I study how, in a home-market scenario, a unilateral rise in uniform cross-sector import tariffs affects wages, countrywide profits, and welfare. Firms face resource constraints and wages are simultaneously determined. Economy-wide protectionism reduces the foreign wage without affecting the domestic one. Domestic countrywide profits benefit from a small rise in uniform tariffs, whereas the foreign counterpart is damaged. Domestic welfare is unambiguously hindered. Hence, the general-equilibrium cross-sector perspective goes against the textbook version theory of the optimal tariff in partial equilibrium. Rationalization of these effects suggests a political-economy view on tariff formation in general equilibrium. Then I extend the model to segmented markets, considering uniform specific and ad valorem tariffs for bilateral and unilateral trade policies. Keywords: Cournot competition; Home market; Income distribution; Segmented market; Welfare (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:78:y:2024:i:2:s1090944324000231 DOI: 10.1016/j.rie.2024.100959 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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