Competition, Productivity and Trade, Reconsidered

Tomohiro Ara

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: We study unilateral trade liberalization and unilateral market expansion and their impact on optimal tariffs in a heterogeneous firm model with a general productivity distribution and an endogenous wage. We show that unilateral trade liberalization entails selection effects, but unilateral market expansion entails anti-selection effects in a country of origin. Conditional on the two sufficient statistics for welfare, the optimal level of import tariffs is the same across different trade models with a constant trade elasticity, but more generally the optimal level depends on the micro structure that makes the trade elasticity variable.

Pages: 42 pages
Date: 2021-04
New Economics Papers: this item is included in nep-cwa and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:21032

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