Strategic Export Policy in the Presence of Subcontracting

Ho-Chyuan Chen () and Wen-Jung Liang
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Ho-Chyuan Chen: National Kaohsiung First University of Science and Technology, Postal: Ho-Chyuan Chen, Department of Risk Management and Insurance, National, Kaohsiung First University of Science & Technology, Nantz, Kaohsiung City 811,
Wen-Jung Liang: Tamkang University

Journal of Economic Integration, 2007, vol. 22, 973-994

Abstract:

This paper examines the optimal export policies when ex ante negotiation over subcontract manufacturing occurs between two competing international-firms. It show that it could be optimal for the exporting country to adopt either a different or a parallel trade policy between the two exporting goods (the final product and the subcontracted product). However, a different trade policy that taxes the finalproduct export and subsidizes the subcontracted-product export is not ever optimal. When the exporting firm is a pure subcontractor, taxing the single export (subcontracted product) becomes the only optimal trade policy of the exporting country. Morever, the exporting country imposes a less aggressive trade policy in response given that the importing country inflicts a more aggressive trade policy.

Keywords: Subcontracting; International Trade; Nash Bargaining; Trade Policy (search for similar items in EconPapers)
JEL-codes: F13 L13 (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0420

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