Strategic Trade Policy for Exporting Industries: More General Results in the Oligopolistic Case

Tor Klette

Oxford Economic Papers, 1994, vol. 46, issue 2, 296-310

Abstract: This paper examines the optimal trade policy for exporting firms in oligopolistic industries. The analysis is based on a minimum set of restrictions on the profit functions and with an arbitrary number of domestic and foreign producers. In an industry with quantity competition, a simple rule is derived that shows how to determine the direction of an optimal trade policy in terms of a few characteristics of the model. The analysis makes clear how scale economies (in a particular sense) favor the case for an export subsidy, while product differentiation tends to support the case for an export tax. Copyright 1994 by Royal Economic Society.

Date: 1994
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