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

Gene Grossman and Giovanni Maggi

No 6211, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We investigate whether a welfare-maximizing government ought to pursue a program of" strategic trade intervention or instead commit itself to free trade when 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. In the event commitment to free trade may be desirable even in settings where profit-shifting would be" possible. We analyze the desirability of such a commitment when the government is well" informed about firms' types and actions, and when it suffers from an informational disadvantage."

JEL-codes: F13 (search for similar items in EconPapers)
Date: 1997-10
Note: ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published as Global Integration and Competition, R. Sato, R.V. Ramachandran and K. Minoeds., Boston/Dordrecht/London: Kluwer Academic Publishers, 1998.

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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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