Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/121042
Authors: 
Campolmi, Alessia
Fadinger, Harald
Forlatiz, Chiara
Year of Publication: 
2009
Series/Report no.: 
FIW Working Paper 40
Abstract: 
We study trade policy in a two-sector Krugman type model of trade. We conduct a general analysis allowing for three different instruments: tariffs, export taxes and production subsidies. For each instrument we consider unilateral trade policy without retaliation. When carefully disentangling the different effects that determine policy makers' choices and modeling general equilibrium effects of taxes/tariffs, we find that production subsidies are always inefficiently low and driven by terms of trade effects. In the cases of tariffs and export taxes the home market effect prevails for some parameter combinations but mostly trade policy is determined by terms of trade effects and the desire to reduce distortions arising from monopolistic competition. Hence, our analysis sheds new light on trade policy in a model of intra-industry trade.
Subjects: 
Home Market Effect
Terms of Trade
Tariffs and Subsidies
JEL: 
F12
F13
F42
Document Type: 
Working Paper

Files in This Item:
File
Size
689.79 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.