EconPapers    
Economics at your fingertips  
 

Geography, Competition, and Optimal Multilateral Trade Policy

Antonella Nocco (), Gianmarco Ottaviano () and Matteo Salto

No 19109, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: How should multilateral trade policy be designed in a world in which countries differ in terms of market access and technology, and ?firms with market power differ in terms of productivity? We answer this question in a model of monopolistic competition in which variable markups increasing in firm size are a key source of misallocation across ?firms and countries. We use ?disadvantaged?to refer to countries with smaller market size, worse state of technology (in terms of higher innovation and production costs), and worse geography (in terms of more remoteness from other countries). We show that, in a global welfare perspective, optimal multilateral trade policy should: promote the sales of low cost ?firms to all countries, but especially to disadvantaged ones; trim the sales of high cost ?firms to all countries, but especially to disadvantaged ones; reduce firm entry in all countries, but especially in disadvantaged ones. This would not only restore efficiency but also reduce welfare inequality between advantaged and disadvantaged countries if their differences in market size, state of technology and geography are large enough.

Keywords: International trade policy; monopolistic competition; ?rm heterogeneity; pricing to market; multilateralism. (search for similar items in EconPapers)
JEL-codes: D4 D6 F1 L0 L1 (search for similar items in EconPapers)
Pages: 38
Date: 2019
New Economics Papers: this item is included in nep-bec, nep-geo and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
ftp://ftp.unibocconi.it/pub/RePEc/baf/papers/cbafwp19109.pdf (application/pdf)

Related works:
Journal Article: Geography, competition, and optimal multilateral trade policy (2019) Downloads
Working Paper: Geography, Competition and Optimal Multilateral Trade Policy (2019) Downloads
Working Paper: Geography, Competition, and Optimal Multilateral Trade Policy (2019) Downloads
Working Paper: Geography, Competition, and Optimal Multilateral Trade Policy (2019) Downloads
Working Paper: Geography, competition and optimal multilateral trade policy (2019) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:baf:cbafwp:cbafwp19109

Access Statistics for this paper

More papers in BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy Via Röntgen, 1 - 20136 Milano - Italy. Contact information at EDIRC.
Bibliographic data for series maintained by Erika Somma ().

 
Page updated 2020-04-28
Handle: RePEc:baf:cbafwp:cbafwp19109