Endogenous Quality Effects of Trade Policy

Jose Luis Moraga () and Jean-Marie Viaene ()
Additional contact information
Jose Luis Moraga: Groningen University
Jean-Marie Viaene: Erasmus Universiteit Rotterdam

No 99-094/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We study the optimal trade policy against a foreign oligopoly withendogenous quality. We show that, under the Most Favoured Nation(MFN) clause, a uniform tariff policy is always welfare improvingover the free trade equilibrium. However, a nonuniform tariff policyis always desirable on welfare grounds. First best policy typicallyconsists of setting a subsidy on the low-quality product and a tax onhigh-quality one. Another example of such a nonuniform tariff policyis a Regional Trade Agreement (RTA). We show that, if a welfareimprovement is possible through a RTA, it is always with the low-quality producing country that it has to be achieved.

Keywords: Endogenous Quality; Hedonic Prices; Most Favored Nation (MFN) clause; Optimal Tariff; Regional Trade Agreement (RTA) (search for similar items in EconPapers)
JEL-codes: F12 F13 F15 (search for similar items in EconPapers)
Date: 1999-12-22
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.tinbergen.nl/99094.pdf (application/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:tin:wpaper:19990094

Access Statistics for this paper

More papers in Tinbergen Institute Discussion Papers from Tinbergen Institute Contact information at EDIRC.
Bibliographic data for series maintained by Tinbergen Office +31 (0)10-4088900 ().