Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/75860
Authors: 
Gonzales, José Luis Moraga
Viaene, Jean-Marie
Year of Publication: 
2001
Series/Report no.: 
CESifo Working Paper 446
Abstract: 
Trade reforms in transition economies are analyzed in a model of trade and vertical product differentiation. We first show that trade liberalization in transition economies reduces the local firm's output and raises the prices of all variants. Second, we find that neither free trade nor the absence of a subsidy are optimal. Third, there exists a rationale for a government commitment to use socially optimal trade and industrial policies to release the domestic firm from low-quality production. Finally, we establish an equivalence result between the effects of exchange rate changes and those of trade policy on price competition (but not on social welfare).
Subjects: 
Exchange rates
leapfrogging
optimal trade policy
product quality
trade liberalization
Document Type: 
Working Paper

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