Targeted strategic trade policy with domestic cost heterogeneity

Dermot Leahy, Catia Montagna

    Research output: Working paperDiscussion paper

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    Abstract

    This paper examines optimal strategic trade policy under oligopoly with many home and foreign firms when firms have different levels of efficiency and a trade-off exists between the subsidy bill and firms’ profits. The first-best policy involves a structure of firm-specific export subsidies and export taxes in which the government favours the most efficient firms unless the social cost of funds is sufficiently high. When the policy is constrained to a uniform subsidy, the optimal policy depends on the relative number of home and foreign firms and on the curvature of demand. Deficiencies of the uniform subsidy are examined.
    Original languageEnglish
    PublisherUniversity of Dundee
    Publication statusPublished - 1998

    Publication series

    NameDundee Discussion Papers in Economics
    PublisherUniversity of Dundee
    No.100
    ISSN (Print)1473-236X

    Keywords

    • Strategic trade policy
    • Heterogeneous firms
    • Export subsides

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  • Cite this

    Leahy, D., & Montagna, C. (1998). Targeted strategic trade policy with domestic cost heterogeneity. (Dundee Discussion Papers in Economics; No. 100). University of Dundee.