Domestic Welfare Effects of Foreign Strategic Trade Policies

Kohler, Philippe; Moore, Michael O.

doi:2003.18.3.573

The Journal of Economic Integration 2003 September;18(3) :573-586.
DOI: https://doi.org/10.11130/jei.2003.18.3.573

Domestic Welfare Effects of Foreign Strategic Trade Policies

Philippe Kohler, Michael O. Moore,

Institut d'Etudes Politiques de Paris
The George Washington University

ABSTRACT

Within a duopoly strategic trade policy model, we analyze the effect of foreign strategic trade policies on domestic welfare when the domestic government pursues a laissez-faire import policy. With Cournot competition and domestic production and consumption, an increase in the foreign strategic export subsidy increases domestic welfare when the domestic price exceeds the foreign firm marginal cost. With Bertrand competition, an increase in the foreign strategic export tax has ambiguous effects on domestic welfare and depends on the degree of product differentiation and domestic cross-price elasticity of demand between domestic and foreign goods. JEL Classifications: F13

Keywords: D

REFERENCE

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2.	Carmichael, C., (1987), "The role of export credit subsidies and its welfare consequences", Journal of International Economics, 23, 1-19.