Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/121122
Authors: 
Colacicco, Rudy
Year of Publication: 
2013
Series/Report no.: 
FIW Working Paper 126
Abstract: 
In a two-country general oligopolistic equilibrium model, I study how cross-sector strategic trade policy affects wages, countrywide profits, and welfare. Firms face resource constraints and wages are simultaneously determined. Relative to free trade, cross-sector protectionism generates a reduction in the foreign wage without affecting the domestic wage. Domestic countrywide profits benefit from small import tariffs, whereas the foreign counterpart is hit, but when sectors share the same technology. Domestic welfare is unambiguously penalized. Hence, the general-equilibrium cross-sector perspective goes against the textbook version theory of the optimal tariff in partial equilibrium. Rationalization of these effects suggests a political-economy view on tariff formation in general equilibrium.
Subjects: 
Cournot Competition
Home Market
Import Tariff
Income Distribution
Welfare
JEL: 
D43
D51
F12
F13
L11
L13
Document Type: 
Working Paper

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