Coordinating Tariff Reduction and Domestic Tax Reform under Imperfect Competition*

A major constraint on trade liberalization in many countries is the prospective loss of government revenue. Recent results, however, have established a simple and appealing strategy for overcoming this difficulty, whilst still realizing the efficiency gains from liberalization, in small, competitive economies: combining tariff cuts with point‐for‐point increases in destination‐based consumption taxes unambiguously increases both national welfare and total government revenue. This note explores the implications of imperfect competition for this strategy. Examples are easily found in which this strategy unambiguously reduces domestic welfare.     

Prices and Information Under Imperfect Competition

Imperfectly competitive product markets cannot be informationally efficient as private information has strategic implications interfering with price adjustment. This is illustrated in a duopoly model with sequential price setting where private information either leads to prices not being adjusted to all available information or to adjusted but biased prices.     

Two-Part Trade Policy under Imperfect Competition

In this paper we consider the potential gain of a government pursuing a two-part trade policy: an import license for entry, along with a per-unit tariff on imports. The model is a two-stage game of complete but imperfect information. In the first stage, the domestic government sets trade policy, while in the second stage the home and foreign producers behave as Cournot competitors. The paper demonstrates that the optimal trade policy depends upon the number of firms, the degree of heterogeneity in cost functions, and the degree of convexity in cost functions.     

Customs Union and Gains from Trade Under Imperfect Competition: Variation of a Kemp-Wan Theme

In a world where firms are oligopolists, is it possible to create a customs union that raises the welfare of member countries without hurting non-member countries? We give sufficient conditions for an affirmative answer.     

Trade and Gains from Trade Between Profit-maximizing and Labour-managed Countries with Imperfect Competition

This paper offers a theoretical analysis of trade and the gains from trade in general equilibrium under imperfect competition by assuming that all firms in one country are of the labour-managed type (maximizing the income of labour) while those in the other country are of the profit-maximizing type. Our main conclusion is that if the labour-managed country is larger than or equal to the profit-maximizing country, the profit-maximizing country exports the imperfectly competitive commodity and gains from trade while the labour-managed country exports the perfectly competitive commodity and may lose from trade.     

不完全竞争、非对称信息下的最优进口贸易政策和产业政策

本文讨论了不完全竞争和非对称信息情况下 ,如何运用进口贸易政策和产业政策增进本国福利的问题。本文发现 ,(1 )在Cournot同质产品竞争的情况下 ,制定可以诱使本国企业显示真实成本的政策规则可以实现与完全信息情况相同的配置结果 ;并且 ,本国企业的生产成本越低 ,政策规则规定的最优关税越低 ;在某些成本结构下 ,甚至应该执行零关税政策。 (2 )在圆形城市空间竞争 (SpatialCompetitioninCircularCity)的情况下 ,生产补贴和关税的作用完全等价 ;不存在可以实现事后效率的政策规则 ,并且 ,约束最优结果不是一个PBE均衡结果 ,本国政府的最优政策是制定等于单位运输成本的关税。上述结论蕴含 ,最优政策干预以及它能否消除非对称信息可能带来的效率损失依赖于竞争类型 ,而不依赖于信息结构 ,因此 ,它不会发生扭曲     

Trade Imbalance and Domestic Market Competition Policy

This study investigates the effect of a country's suppression of competition in its market for nontradables. It assumes that the initial equilibrium is stationary and demonstrates that if competition is suppressed in a small country, the country's trade surplus increases in the short run. In the large country case, the same change creates an excess demand for future tradables and affects the relative price between present and future tradables. Using a two‐country model, the study shows that this price change redistributes real wealth from the country with a trade deficit to the country with a trade surplus.     

Some Implications of Imperfect Competition For Recent Trade Theory*

This paper argues that in a general-equilibrium context, it is not sensible for oligopolistic (and mono-polistically competitive) firms to maximize profit, because the outcome would be sensitive to the choice of the numeraire. the natural objective of these firms would be to maximize the utility of the shareholders if the shareholders are identical. I show that even if each firm takes the representative individual's marginal utility of income as given, the outcome of the utility maximization objective is Pareto optimal, and in equilibrium, each firm equates price with marginal cost.     

Dynamic Gains from International Trade with Imperfect Competition and Market Power

This paper revisits the gains from trade under imperfect competition by explicitly modeling strategic competition and entry. The papers highlights a welfare cost of imperfect competition, due to inefficiently high entry. Through increasing competition, international trade lowers price–cost markups and reduces excessive entry. This adds on a "competitive" channel for gains from trade to the well-known "product diversity" channel from previous literature. Both channels will increase the return to investment and raise the steady-state capital stock. An alternative case is possible, however, where there is inefficiently low entry. In that case, trade tends to be "anticompetitive," raising price–cost markups and encouraging increased entry.     

Ambiguous Social Welfare Effects of Price Regulation Under Imperfect Competition

Conventional wisdom is that a binding price ceiling increases output and so increases social welfare if imposed on an imperfectly competitive market. However, this paper shows that a price ceiling can be harmful to social welfare even though it increases industry output and consumer surplus. This model can be applied to the pharmaceutical industry under price control in many countries, e.g., U.K., Canada, Germany and Japan.     

Market Integration and Competition in Environmental and Trade Policies

Recent empirics suggest the relevance of transport cost reductions for world trade growth along with eliminations in protectionist trade barriers. To address the welfare effects of trade cost reductions in a context of ??trade and the environment,?? we develop a two-stage game model where governments choose environmental and trade policies and firms play a Cournot-Nash game. We show that reductions in transport costs lead to lower emission taxes and higher tariffs. And, we find that the degree of pollution damage plays a central role in whether market integration is welfare-improving relative to autarky.     

Preferential Trade Liberalization Under Cournot Competition

Suppose a country imports a homogeneous good from n foreign countries/producers and wants to eliminate tariffs on imports from m < n of them. If foreign producers differ in their marginal costs, which ones will be among the m that are granted free trade? This paper shows, among other things, that under constant marginal cost and fairly general assumptions about demand it will be the least efficient producers.     

扩大内需的税收政策取向

目前 ,我国扩大内需的最大障碍是有效需求不足 ,为此 ,中央采取了积极的财政政策 ,并努力发挥货币政策的作用 ,综合运用多种手段调控经济运行。但由于我国经济长期处于“短缺”状态 ,许多宏观政策包括税收政策 ,其目的是防止过渡的投资需求和消费需求引起的通货膨胀。控制投资和消费 ,防止经济过热。本文分析了在积极财政政策对经济活动效果不够明显的背景下 ,提出了调整现行税收政策的建议 ,以适应扩大内需 ,促进经济增长。     

Pigouvian Taxes Under Imperfect Competition If Consumption Depends on Emissions

The paper considers environmental regulation of a consumption good and an externality which influence demand and costs in a nonseparable way. Under monopoly two instruments are always required for first-best. The Pigouvian tax is more complicated than anticipated.     

经济全球化下的国际税收竞争与税收优惠

本文从经济全球化入手,论述了经济全球化、税收国际化、国际税收竞争与税收优惠的关系,主张纵向研究国际税收竞争,从国民经济发展的全局出发审视利用税收优惠手段参与国际税收竞争的利与弊.     

Welfare‐improving Coordinated Tariff and Sales Tax Reforms under Imperfect Competition

This paper studies the welfare effects of coordinated domestic sales tax reform associated with a reduction of the import tariff under imperfect competition. We set up a simple oligopoly trading model where domestic and exporting firms compete in the home market. We show that, if the initial levels of import tariff and sales tax are positive, there always exist welfare‐improving sales tax reforms. In some cases, a reduction of the sales tax accompanied by a reduction of the import tariff increases social welfare, whereas in other cases, raising the sales tax can increase social welfare.     

Imperfect Competition and the Gains from Trade in a Macro Duopoly Model

A general-equilibrium duopoly trade model is developed. In the micro model, constant-elasticity market demand curves produce backward-bending reaction functions. This is combined with a macro analysis in which the real wage is determined competitively, while nominal variables depend on the money supply. Trade can lead to large increases in aggregate output, employment, and real wages. The gains from trade are the result of increases in market size, and greater competition in each market. The benefits of trade are largest when marginal-cost curves slope downward and the labor supply curve is elastic.     

How Does Imperfect Competition in the Labor Market Affect Unemployment Policies?

We consider a continuum of workers ranked according to their abilities to acquire education and two firms with different technologies that imperfectly compete in wages to attract these workers. The education cost to be borne by workers is higher in the high-technology firm. In equilibrium, we show that the unemployed workers are those with the lowest initial abilities. We then study different policies that subsidize either education cost or wages. We found that the first-best allocation can only be implemented by selective policies. We analyze second-best nonselective policies and show that, in terms of welfare, subsidizing education costs or wages is strictly equivalent.     

Market Access and WTO Border Tax Adjustments for Environmental Excise Taxes under Imperfect Competition

The literature identifies linkages between domestic environmental policies and trade, the treatment of imports being an important issue in administration of domestic environmental excise taxes. With the aim of ensuring foreign exporters do not attain a competitive advantage, border tax adjustments are used. Since most environmental excise taxes apply to intermediate goods, the relevant border tax adjustment applies to final imported goods. However, when both intermediate and final goods markets are oligopolistic, border tax adjustments may be non‐neutral. Moreover, even if market access is unchanged, border tax adjustments can still lead to redistribution of profits between domestic and foreign firms.     

Imperfect Competition and Corporate Governance

This paper studies the objective function of the firm in imperfectly competitive industries. If those involved in decisions are also consumers the usual monopoly distortion is reduced. In oligopolistic industries, this may give the firm a strategic advantage and hence, in the right circumstances, will increase profit. If the firm cannot commit not to change its constitution, we find a Coase‐like result where all market power is lost in the limit. This enables us to endogenise the objective function of the firm. Finally we present a more abstract model of governance in the presence of market distortions.