Endogenous Market Structures and Strategic Trade Policy

Federico Etro ()

No 149, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: We characterize the optimal export promoting policies for international markets whose structure is endogenous. Contrary to the ambiguous results of strategic trade policy for markets with a fixed number of firms, it is always optimal to subsidize exports as long as entry is endogenous, under both competition in quantities and in prices. With homogenous goods the optimal export subsidy is a fraction 1/€ of the price, where € is the elasticity of demand, the exact opposite of the optimal export tax in the neoclassical trade theory. A similar argument can be applied to show the general optimality of R&D subsidies and of competitive devaluations to promote exports in foreign markets where entry is endogenous.

Keywords: Trade policy; Export Subsidies; Competitive Devaluations; Endogenous Market Structures (search for similar items in EconPapers)
JEL-codes: F12 F13 F31 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2008-12, Revised 2008-12
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Citations: View citations in EconPapers (1)

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http://repec.dems.unimib.it/repec/pdf/mibwpaper149.pdf First version, 2008 (application/pdf)

Related works:
Journal Article: ENDOGENOUS MARKET STRUCTURES AND STRATEGIC TRADE POLICY (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:mib:wpaper:149

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