Free Trade vs Strategic Trade: A Peek into Pandora's Box

Giovanni Maggi and Gene Grossman

Working Papers from Princeton, Woodrow Wilson School - Public and International Affairs

Abstract: We investigate whether a welfare-maximising government ought to pursue a program of strategic trade intervention or instead commit itself to free trade when, in the former case, domestic firms will have an opportunity to manipulate the government's choice of the level of intervention. Domestic firms may overinvest in physical and knowledge capital in a regime of strategic intervention in order to influence the government's choice of subsidy.

Keywords: EXPORTS; TRADE POLICY (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Pages: 25 pages
Date: 1997
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Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Free Trade Vs. Strategic Trade: A Peek into Pandora's Box (1998)
Working Paper: Free Trade vs. Strategic Trade: A Peek into Pandora's Box (1997)
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