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Tariffs versus quotas in the presence of imperfect competition and cross‐border externalities

Taiji Furusawa (), Keisaku Higashida and Jota Ishikawa

Canadian Journal of Economics/Revue canadienne d'économique, 2004, vol. 37, issue 2, 445-458

Abstract: Abstract. We consider trade policies intended to affect the production of a foreign monopolist that generates negative externalities. We derive the optimal tariff and optimal import quota and examine which policy measure should be used to maximize domestic welfare. We find that if the domestic government does not have full information on the foreign firm's production method and if cross‐border externalities exist, import quotas are in some cases preferable to tariffs. Otherwise, however, tariffs are preferable to quotas. JEL Classification: F13, F18 Droits de douane versus contingentements quand il y a concurrence imparfaite et effets externes trans‐frontaliers. Les auteurs examinent les politiques commerciales qui veulent affecter la production d’un monopoleur étranger qui engendre des effets externes négatifs. On définit le droit de douane optimal et le contingentement optimal des importations, et on détermine quelle politique devrait être utilisée pour maximiser le niveau de bien‐être au niveau national. Il appert que si le gouvernement national n’a pas une information complète sur les méthodes de production de la firme étrangère et si les effets externes traversent les frontières, un contingentement des importations est préférable dans certains cas à des droits de douanes. Autrement, cependant, les droits de douane constituent la solution préférable.

Date: 2004
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https://doi.org/10.1111/j.0008-4085.2004.00010.x

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