Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/225290 
Year of Publication: 
2020
Series/Report no.: 
cege Discussion Papers No. 405
Publisher: 
University of Göttingen, Center for European, Governance and Economic Development Research (cege), Göttingen
Abstract: 
We develop an asymmetric general oligopolistic equilibrium (AGOLE) model, which extends the range of possible applications in general oligopolistic equilibrium modelling. The AGOLE allows to incorporate endogenous and asymmetric marginal utilities of income across countries.As a first exemplary application, we analyze the effects of asymmetric labor market policies. When one country increases its labor supply per capita, it is optimal for its firms to supply a part of the additional production to the other country at reduced prices to artificially inflate domestic prices. This results in a spillover effect letting consumption increase abroad due to a change in the terms of trade. In AGOLE, oligopolistic competition can induce asymmetric price reactions that shift real income and demand between the two countries. We argue that incorporating this cross-country demand channel is crucial for analyzing asymmetric countries or policies in presence of firms with market power.
Subjects: 
general oligopolistic equilibrium
strategic trade
international trade and labor market interactions
factor income distribution
JEL: 
F12
D51
L13
F16
D33
Document Type: 
Working Paper

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