Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18347
Authors: 
Guldager Jørgensen, Jan
Schröder, Philipp J. H.
Year of Publication: 
2005
Series/Report no.: 
DIW Discussion Papers 496
Abstract: 
Recent literature on the workhorse model of intra-industry trade has explored heterogeneous cost structures at the firm level. These approaches have proven to add realism and predictive power. This note shows, however, that this added realism also implies that there may exist a positive bilateral tariff that maximizes national and world welfare. Applying one of the simplest specifications possible, namely a symmetric two-country intra-industry trade model with fixed export costs that are heterogeneous across firms, we find that the reciprocal reduction of small tariffs reduces welfare.
Subjects: 
Optimal tariff
welfare
intra-industry trade
monopolistic competition
protectionism
JEL: 
F15
F13
F12
Document Type: 
Working Paper

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