Backfiring tariffs in vertically related markets

Ishikawa, Jota; Lee, Ki‐Dong

doi:10.1016/s0022-1996(96)01463-8

Cited by 52 publications

(31 citation statements)

References 8 publications

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“…Increased competition in the upstream part of the industry makes the wholesale price less sensitive to changes in the downstream tax rate, which weakens the rent-extraction motive for downstream trade policy. 23 The efficiency motive, on the other hand, is also determined by the degree of downstream competition. The lower the number of firms operating in the downstream market, the stronger the incentives to reduce taxes (or increase subsidies) in order to stimulate competition.…”

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confidence: 99%

Industry Concentration and Strategic Trade Policy in Successive Oligopoly

Nese

Straume

2007

J Ind Compet Trade

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We study a policy game between exporting and importing countries in vertically linked industries. In a successive international Cournot oligopoly, we analyse incentives for using tax instruments strategically to shift rents vertically, between exporting and importing countries, and horizontally, between exporting countries. We show that the equilibrium outcome depends crucially on the relative degree of competitiveness in the upstream and downstream parts of the industry. With respect to national welfare, a more competitive upstream industry may benefit an exporting (upstream) country and harm an importing (downstream) country. On the other hand, a more competitive downstream industry may harm exporting countries. Copyright Springer Science+Business Media, LLC 2007successive oligopoly, strategic trade policy, industry concentration, F12, F13, L13,

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confidence: 99%

Industry Concentration and Strategic Trade Policy in Successive Oligopoly

Nese

Straume

2007

J Ind Compet Trade

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“…But these models do not consider FDI in vertically related oligopolistic industries; models with monopolistic competition in intermediates lack strategic interaction. Our model also helps merge the literature on FDI in oligopolistic markets with the literature on trade policy in vertically related industries, such as Sleuwaegen et al (1998), Ishikawa and Lee (1997), Ishikawa and Spencer (1999), and Jones (1991, 1992).…”

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confidence: 97%

Exporting versus Direct Investment under Local Sourcing

Glass

Saggi

2005

Rev. World Econ.

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This paper examines a setting where foreign direct investment (FDI) shifts demand for an intermediate good from the source to the host country. A domestic and a foreign firm choose between exports or FDI, always sourcing the intermediate locally. We show that by increasing the price of the intermediate, outward FDI can act as a cost-raising strategy for a firm and that attracting FDI can raise host country welfare. Two-way FDI is the equilibrium when the countries have similar market sizes. However, such FDI reduces global welfare relative to two-way exporting since it eliminates indirect competition between suppliers. JEL no. F12, F13, F23, L13

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“…In the present model, as Equation (3) shows, an increase in the trade policy uncertainty pulls up the growth rate of the domestic firm's profit, to accelerate the start time of the export. If this accelerating effect surpasses the standard postponing effect caused by the value of waiting, overall effect accelerates the start time of the export, which we define here as a stochastic version of the backfiring effect that was shown by Ishikawa and Lee (1997) [9] in vertically related deterministic markets. If 1 ε ≧ , on the other hand, graph of φ * is depicted as a decreasing graph on s-φ * space as in Figure 2, showing that increase in the trade policy uncertainty delays the start time of the export, which is consistent with the typical case in the optimal stopping model.…”

Section: Optimal Start Time Of the Exportmentioning

confidence: 99%

Backfiring Effect of Uncertain Trade Policy

Fujita¹

2016

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Constructing a stochastic international trade model where exporting firm faces uncertain trade policy expressed by geometric Brownian motion, we examine the effect of an increase in the trade policy uncertainty on the optimal start time of export. It is revealed that when the trade policy is less uncertain than a threshold level, an increase in the trade policy uncertainty accelerates the optimal exporting timing of export, which is in sharp contrast to the standard result that an increase in the uncertainty postpones the optimal timing. It is also revealed that such a stochastic version of the backfiring effect reduces the world welfare if demand for exported products is low, starting export is costly or future is not important.

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Backfiring tariffs in vertically related markets

Cited by 52 publications

References 8 publications

Industry Concentration and Strategic Trade Policy in Successive Oligopoly

Industry Concentration and Strategic Trade Policy in Successive Oligopoly

Exporting versus Direct Investment under Local Sourcing

Backfiring Effect of Uncertain Trade Policy

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