Protecting consumers through protection: The role of tariff-induced technology transfer |
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Authors: | Tarun Kabiraj |
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Affiliation: | a Indian Statistical Institute, Calcutta, India b Centre for Studies in Social Sciences, RI Baishnabghata Patuli Township, Calcutta, 700094 India |
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Abstract: | We consider a duopolistic trade model where a tariff induces the foreign firm to transfer its superior technology to the domestic rival. Contrary to the conventional wisdom, such a tariff raises consumers’ surplus relative to the free trade situation. We characterize the optimal tariff with and without precommitment on the part of the local government. Possibility of technology transfer reduces the optimal tariff rate compared to the no-transfer situation. |
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Keywords: | D43 F13 L13 |
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