Elasticity of substitution and anti-dumping decisions

Abstract

Motivated by a monopolistic competition model with market segmentation and international price discrimination, this paper analyzes whether there is an inverse relation between the elasticity of substitution and final ad valorem antidumping duties across products. We test this for 19 countries using data on antidumping from the Global Antidumping Database and US data at the 6-digit HS product level for the elasticity of substitution from Broda and Weinstein (Q J Econ 121(2): 2006). The results in our empirical investigation support a negative relation between the elasticity of substitution and the final ad valorem anti-dumping duties.

A Game Analysis of Trade Dumping and Antidumping

“…By employing a monopolistic competition model with market segmentation and international price discrimination, Hansen et al [14] empirically analyzes whether or not there is an inverse relationship between the elasticity of substitution and final ad valorem anti-dumping duties across products and provide evidence to support a negative relationship between the two variables. In terms of the impact of anti-dumping rules on firms' production decisions as to how much and where to produce, Haaland and Ian Wooton [15] measures may have unforeseen effects if they induce direct foreign investment and increase domestic competition.…”

“…For the sake of convenience of communication, let us assume that each of these nations produces one kind of product, both of which are horizontally differentiable but are considered as substitute of each other. That is, the substitution of the products is therefore inelastic [14]. Let the trading revenue of the exporting nation generated from dumping its product in the importing nation be export S and the revenue of the importing nation generated from its domestic market when the exporting nation does not dump its product be import S , satisfying that when 0 export S = , import S reaches its maximum.…”