Protection for sale under monopolistic competition |
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Authors: | Pao-Li Chang |
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Institution: | School of Economics and Social Sciences, Singapore Management University, 469 Bukit Timah Road, Singapore 259756, Singapore |
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Abstract: | This paper broadens the protection for sale model of Grossman and Helpman (1994) by incorporating the Krugman-Dixit-Stiglitz model of monopolistic competition, given its importance in explaining the prevalence of intraindustry trade. Several new results arise in this paper. First, the endogenous import tariff will never fall below zero, even in unorganized sectors. Second, the endogenous export policy for organized sectors is not necessarily an export subsidy, and can be an export tax as in unorganized sectors. Third, the level of import protection varies inversely with the degree of import penetration, regardless of whether the sector is organized or not. |
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Keywords: | F12 F13 |
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