We characterize the optimal export promoting policies for international markets whose structure is endogenous. Contrary to the ambiguous results of strategic trade policy for markets with a fixed number of firms, it is always optimal to subsidize exports as long as entry is endogenous, under both competition in quantities and in prices. With homogenous goods the optimal export subsidy is a fraction 1/€ of the price, where € is the elasticity of demand, the exact opposite of the optimal export tax in the neoclassical trade theory. A similar argument can be applied to show the general optimality of R&D subsidies and of competitive devaluations to promote exports in foreign markets where entry is endogenous.

Etro, F. (2008). Endogenous Market Structures and Strategic Trade Policy [Working paper del dipartimento].

Endogenous Market Structures and Strategic Trade Policy

ETRO, FEDERICO
2008

Abstract

We characterize the optimal export promoting policies for international markets whose structure is endogenous. Contrary to the ambiguous results of strategic trade policy for markets with a fixed number of firms, it is always optimal to subsidize exports as long as entry is endogenous, under both competition in quantities and in prices. With homogenous goods the optimal export subsidy is a fraction 1/€ of the price, where € is the elasticity of demand, the exact opposite of the optimal export tax in the neoclassical trade theory. A similar argument can be applied to show the general optimality of R&D subsidies and of competitive devaluations to promote exports in foreign markets where entry is endogenous.
Working paper del dipartimento
Scientifica
Trade policy; Export Subsidies; Competitive Devaluations; Endogenous Market Structures
English
Etro, F. (2008). Endogenous Market Structures and Strategic Trade Policy [Working paper del dipartimento].
Etro, F
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/23186
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