Trade warfare revisited: Trade and industrial policies when exporting and non-exporting firms co-exist

Kazuhiro Takauchi, Hajime Sugeta and Tomomichi Mizuno

No 2404, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: This paper establishes a two-country, oligopoly trade model in which exporting firms and less-efficient non-exporting firms exist in each country, and firms have quadratic costs. Governments in the two countries conduct policy games involving various combinations of policy tools, including tariffs, production subsidies and export tax/subsidies. We show that the optimal policies have single-peaked relationships with the productivity differences between non-exporting and exporting firms. For example, because tariff can have either a U-shaped or an inverted U-shaped relationship with the productivity difference between firms depending upon other policy instruments available to the governments, improving the efficiency of the non-exporting firm can inhibit trade liberalisation. We also show that if each country can choose a discriminatory production subsidy policy, no trade occurs. Thus, combined trade and industrial policies may induce the decoupling of economies.

Pages: 58 pages
Date: 2024-12
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2024/2404.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.econ.kobe-u.ac.jp:443 (certificate verify failed) (http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2024/2404.pdf [301 Moved Permanently]--> https://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2024/2404.pdf)

Related works:
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:koe:wpaper:2404

Access Statistics for this paper

More papers in Discussion Papers from Graduate School of Economics, Kobe University Contact information at EDIRC.
Bibliographic data for series maintained by Kimiaki Shirahama ( this e-mail address is bad, please contact ).