Asymmetric General Oligopolistic Equilibrium

Quint, Ansgar F.; Rudsinske, Jonas F.

doi:10.2139/ssrn.3715419

Cited by 3 publications

(12 citation statements)

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“…We integrate national corporate taxation and a scope in transfer price decisions that allows for profit shifting into a two-country model of international trade in general oligopolistic equilibrium. We build on the model developed by Neary (2016) and extended by Quint and Rudsinske (2020) for the case of country asymmetries and segmented markets.…”

Section: Theoretical Modelmentioning

confidence: 99%

“…We analyze corporate taxation and tax motivated transfer pricing in an asymmetric general oligopolistic equilibrium trade model based on Quint and Rudsinske (2020). The foundation for this model is developed in Neary (2016).…”

Section: Introductionmentioning

confidence: 99%

“…The key insight is that firms need to be modeled as "large in the small" sector they supply to but "small in the large" economy. In Quint and Rudsinske (2020) we extend this model to allow for segmented markets and country asymmetries, such that not only net trade but total traded quantities can be analyzed and tax rates can di er in the two countries. 5 This allows implementing a transfer pricing decision for intrafirm exports.…”

Section: Introductionmentioning

confidence: 99%

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International Trade and Tax-Motivated Transfer Pricing

Quint

Rudsinske

2020

SSRN Journal

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We study the welfare and distribution e ects of corporate taxation and transfer pricing in an asymmetric general oligopolistic equilibrium trade model. Without profit shifting, an increasing profit tax rate shifts welfare towards the taxing country, where it also decreases real wages, whereas real wages rise in the other country. Labor income increases relative to profit income in both countries. Transfer pricing generates an additional benefit from exporting, such that companies want to expand production. Caused by this supply channel, real wages will rise in both countries. Due to shifting tax incomes, a cross-country demand channel relocates consumption from the high-to the low-tax country. In the low-tax country, real profits decrease such that the labor share of income rises.

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Section: Theoretical Modelmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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International Trade and Tax-Motivated Transfer Pricing

Quint

Rudsinske

2020

SSRN Journal

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“…We analyze corporate taxation and tax motivated transfer pricing in an asymmetric general oligopolistic equilibrium (AGOLE) trade model based on Quint and Rudsinske (2020a). The key element -first introduced in Neary (2016) -are firms that are modeled as "large in the small" sector they supply to but "small in the large" economy.…”

Section: Introductionmentioning

confidence: 99%

“…I analyze unilateral and non-cooperative trade policy in a two-country asymmetric general oligopolistic equilibrium (AGOLE) trade model based on Quint and Rudsinske (2020a). Import tariffs act as a trade barrier, such that cross-country strategic competition is reduced and firms want to produce less.…”

Section: Introductionmentioning

confidence: 99%

Essays on International Trade, Trade Barriers, and Oligopolistic Competition

Rudsinske¹

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Empirical evidence suggests both that market power increased considerably since (e.g. De Loecker et al., 2020 and that firms differ in destination-specific trade barriers (e.g. Munch and Nguyen, 2014). Motivated by these insights, this thesis develops a trade model that allows to analyze the effects of asymmetric policies in general oligopolistic equilibrium, uses this framework to study corporate taxation, tax-motivated transfer pricing and trade policy, and provides evidence that personal characteristics of top managers like nationality and gender can give rise to firm heterogeneity in destination-specific trade barriers.The first chapter develops a trade model with segmented markets that allows to analyze oligopolistic behavior across asymmetric countries. Firms' oligopolistic behavior has macro-level effects when countries are asymmetric. This can induce deviations from the law of one price, which gives rise to terms-of-trade based international shifts in consumption and welfare. Corporate taxation and taxmotivated transfer pricing are incorporated into this model in the second chapter. Without transfer pricing, a higher profit tax rate shifts welfare towards the taxing country. Tax-motivated transfer pricing introduces an additional incentive for all firms to export and, consequently, to expand production, such that real wages rise in both countries. As tax income shifts, consumption is relocated from the high-to the low-tax country. Import tariffs in this setting are studied in the third chapter. Their anti-competitive effect reduces labor demand as firms want to shorten supply. Unilaterally raising the import tariff increases domestic welfare at the foreign country's expense, but also favors profit incomes relative to labor incomes, as real wages fall.The fourth chapter shows a destination-specific pro-trade effect of top managers' nationality. The effect is especially pronounced for institutionally distant destinations, which can be seen as bridging the gap between institutionally dissimilar countries. Likewise, the effect is more pronounced for destinations with less developed institutions, which indicates that manager connections help overcoming trade barriers created by low institutional quality. Finally, the fifth chapter uncovers trade-reducing effects of institutional discrimination against female managers in destination markets. This barrier exists for firm internationalization on the micro and international trade on the macro level. Importantly, it might give rise to disadvantages for female managers even in non-discriminatory countries.

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How unilateral tariffs harm workers under oligopoly

Rudsinske

2023

World Economy

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I study import tariffs in an asymmetric general oligopolistic equilibrium trade model. Their anti‐competitive effect reduces labour demand because firms want to shorten supply. Unilaterally increasing the import tariff raises domestic welfare at the foreign country's expense, but comes at the cost of favouring profit recipients as compared to workers, whose real wages fall. Only if initial tariffs are low, the tariff‐increasing government could use its rising tariff revenue to neutralise the distributional effect or the negative effect on workers. If supporting workers is the policy objective, tariffs do not appear to be a suitable tool under oligopoly.

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Asymmetric General Oligopolistic Equilibrium

Cited by 3 publications

References 14 publications

International Trade and Tax-Motivated Transfer Pricing

International Trade and Tax-Motivated Transfer Pricing

Essays on International Trade, Trade Barriers, and Oligopolistic Competition

How unilateral tariffs harm workers under oligopoly

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