Trade policy with increasing returns and imperfect competition

1988 ◽  
Vol 24 (3-4) ◽  
pp. 299-316 ◽  
Author(s):  
James R. Markusen ◽  
Anthony J. Venables
Keyword(s):  
Trade Policy ◽  
Imperfect Competition ◽  
Increasing Returns

scholarly journals TASTE FOR VARIETY AND ENDOGENOUS FLUCTUATIONS IN A MONOPOLISTIC COMPETITION MODEL

2008 ◽  
Vol 12 (4) ◽  
pp. 561-577 ◽  
Author(s):  
Thomas Seegmuller
Keyword(s):  
Imperfect Competition ◽  
Dynamic Models ◽  
Monopolistic Competition ◽  
Increasing Returns ◽  
Product Diversity ◽  
Endogenous Fluctuations ◽  
The Real ◽  
Imperfectly Competitive ◽  
Local Indeterminacy ◽  
Elastic Labor Supply

In past years, imperfect competition has been introduced in several dynamic models to show how markup variability, increasing returns (decreasing marginal cost), and monopoly profits affect the occurrence of endogenous fluctuations. In this paper, we focus on another possible feature of imperfectly competitive economies: consumers' taste for variety as a result of endogenous product diversity. Introducing monopolistic competition [Dixit and Stiglitz (1977), Benassy (1996)] in an overlapping generations model in which consumers have taste for variety, we show that local indeterminacy can occur under the three following conditions: a high substitution between capital and labor, increasing returns arbitrarily small, and a not too elastic labor supply. The key mechanism for this result is based on the fact that, because of taste for variety, the aggregate price decreases with the procyclical product diversity, which has a direct influence on the real wage and the real interest rate.

scholarly journals Trade policy & imperfect competition

2014 ◽  
Author(s):  
Ευμορφία Μακαντάση
Keyword(s):  
Trade Policy ◽  
Product Differentiation ◽  
Policy Maker ◽  
Imperfect Competition ◽  
Capital Mobility ◽  
Customs Union ◽  
Common External Tariff ◽  
Tax Harmonization ◽  
Capital Tax ◽  
Common Trade

The continuing momentum in establishing Preferential Trade Agreements (PTAs) has triggered my interest in investigating some important theoretical aspects of both multilateralism and regionalism. In particular, this Ph.D. thesis approaches these aspects by using models which include imperfect competition in commodity markets, product differentiation and strategic behavior on the part of the economic decision makers (taken here to be governments and firms). Features, that is, which are widespread in the world we live in.The First Chapter of this thesis, “Product Differentiation and the ‘Most Favored Nation’ Clause” aims at offering a richer insight on the reasons that lie behind the adoption of the MFN tariffs by trading countries in a world where the bulk of trade is in differentiated products. Furthermore, this chapter attempts to shed light on the discussion regarding the interpretation of the term “like products”, which appears in numerous places in GATT legislation, beginning from Article I, and has yet to be interpreted by WTO panels and the Appellate Body. The remaining three chapters of the thesis are guided by the idea that a principal may benefit from passing authority or power to an agent who is different than herself. Various examples of the delegation decision process one might find specifically in managerial, labor and public economics. The mainstream of the notion of delegation in international trade literature has been addressed in preferential agreements such as customs union. One of the distinguishing characteristics of customs unions is that member-states commit themselves in setting a common external tariff (CET) or a subsidy in their trade with non-member countries. However, by explicitly recognizing the strategic aspects of trade policies, a member-state may find to its advantage to delegate authority to set the external policy to its partner. The determination of the optimal policy maker in the union that sets this common trade policy is investigated in the remaining three chapters of my thesis.The Second Chapter of the thesis, “Harmony and Disagreement in Customs Union: the Role of Demand”, examines how the level of demand can influence the choice of the policy maker as well as the cohesion of a customs union.An interesting, probably, insight of this chapter that could partially be a policy recommendation is that in periods of recession that lead to a fall in demand the strains between the union members and, particularly, between the more and the less cost efficient ones increase. In such cases, intra-union transfers from the “rich” to the “poor” might be needed in order to secure the stability and the cohesion of the union, to the benefit of all. In the Third Chapter, “Delegation in a Tripartite Customs Union”, the analysis of the previous chapter is extended to investigate how the delegation decision is affected in a customs union composed of three, rather than two, countries that differ in terms of cost efficiency. The Fourth Chapter, “International Capital Mobility and Delegation in Customs Union” focuses on the so-called “deep regionalism”, namely a set of non-tariff measures in areas such as competition policy, environmental standards ,investment and capital mobility. The most important motivation that has led to this chapter is the realization that many PTAs include agreements of this kind. Another motivation was the absence in the customs union literature of a theoretical connection between capital tax harmonization and delegation decisions in a customs union. In particular, this chapter investigates how the issue of the delegation decision in a CU that decides unanimously the common capital tax system and the tax rate against non-member countries, could be knitted with the tax competition and tax harmonization literature.

scholarly journals International trade and endogenous growth: the case of Czech economy

2011 ◽  
Vol 59 (2) ◽  
pp. 333-338 ◽  
Author(s):  
Marcel Ševela
Keyword(s):  
Imperfect Competition ◽  
Returns To Scale ◽  
Spillover Effect ◽  
Increasing Returns ◽  
Second Step ◽  
Full Data ◽  
Increasing Returns To Scale ◽  
Goods Market ◽  
The Common ◽  
Using Data

The paper is focuses on testing of the presence of increasing returns to scale in the Czech economy production function that is constructed upon Solow growth accounting formula. The growth relation is adapted for imperfect competition in the goods market. In the second step the spillover effect to total factor productivity is tested based on import openness of the economy and share of productive equipment imports to gross domestic product. Using data on Czech economy in years 1993–2009 for OLS estimates, the presence of increasing returns to scale was proved in all tested models, the obtained returns to scale parameter is about 2. Explained variability is relatively poor for the full data sample, limiting the data range to 1999–2009 the model is able explain almost 57 %. Tests for spillover effect modeled through import shares do not bring evidence about appropriate significance, the common test of OLS approach indicated very low contribution for import variables in both versions.

Trade Policy and Imperfect Competition

1994 ◽  
pp. 263-278
Author(s):  
Bo Södersten ◽  
Geoffrey Reed
Keyword(s):  
Trade Policy ◽  
Imperfect Competition

Imperfect competition and pareto-improving strategic trade policy

1992 ◽  
Vol 33 (3-4) ◽  
pp. 363-371 ◽  
Author(s):  
Aslam H. Anis ◽  
Thomas W. Ross
Keyword(s):  
Trade Policy ◽  
Imperfect Competition ◽  
Strategic Trade Policy ◽  
Strategic Trade ◽  
Pareto Improving

Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition, and the International Economy.

1986 ◽  
Vol 96 (381) ◽  
pp. 243 ◽  
Author(s):  
John Cantwell ◽  
Elhanan Helpman ◽  
Paul R. Krugman
Keyword(s):  
Foreign Trade ◽  
Market Structure ◽  
Imperfect Competition ◽  
Increasing Returns ◽  
International Economy
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