Tariffs and Privatization Policy in a Bilateral Trade Model with Corporate Social Responsibility

Sang-Ho Lee () and Lili Xu ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper considers an international bilateral trade model with corporate social responsibility (CSR) and examines the strategic interaction between tariffs and privatization policy. We demonstrate that strategic tariff in a private market is higher than that in a mixed market, while efficient tariff in a private market is lower than that in a mixed market. We then show that privatization policy raises strategic tariff and worsens (improves) domestic welfare when the degree of CSR is low (high). Further, we investigate endogenous choice of privatization policy and demonstrate that both the countries choose nationalization policy even though privatization policy is globally optimal when the degree of CSR is high. This indicates the existence of a prisoner’s dilemma in choosing privatization policy in a bilateral trade model with higher CSR.

Keywords: Bilateral trade; Corporate social responsibility; Privatization; Tariff Policy (search for similar items in EconPapers)
JEL-codes: D43 F12 L13 L33 (search for similar items in EconPapers)
Date: 2017-10
New Economics Papers: this item is included in nep-cta and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:82042

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