دانلود مقاله ISI انگلیسی شماره 17436
عنوان فارسی مقاله

سیاست تجاری: اثر بازار داخلی در برابر قوانین و مقررات تجارت بیرونی

کد مقاله سال انتشار مقاله انگلیسی ترجمه فارسی تعداد کلمات
17436 2014 44 صفحه PDF سفارش دهید 17880 کلمه
خرید مقاله
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عنوان انگلیسی
Trade Policy: Home Market Effect versus Terms-of-Trade Externality
منبع

Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)

Journal : Journal of International Economics, Available online 25 January 2014

کلمات کلیدی
اثر بازار داخلی - قوانین و مقررات تجارت - تعرفه ها و یارانه ها
پیش نمایش مقاله
پیش نمایش مقاله سیاست تجاری: اثر بازار داخلی در برابر قوانین و مقررات تجارت بیرونی

چکیده انگلیسی

We study trade policy in a two-sector Krugman (1980) trade model, allowing for wage, import and export subsidies/taxes. We study non-cooperative trade policies, first for each individual instrument and then for the situation where all instrumentscan be set simultaneously, and contrast those with the efficient allocation. We show that in this general context there are four motives for non-cooperative trade policies: the correction of monopolistic distortions; the terms-of-trade manipulation; the delocation motive for protection (home market effect); the fiscal-burden-shifting motive. The Nash equilibrium when all instruments are available is characterized by first-best-level wage subsidies, and inefficient import subsidies and export taxes, which aim at relocating firms to the other economy and improving terms of trade. Thus, the dominating incentives for non-cooperative trade policies are the fiscal-burden-shifting motives and terms-of-trade effects.

مقدمه انگلیسی

The aim of this paper is to study optimal trade policy in the canonical two-sector Krugman (1980) model, where one sector is characterized by monopolistic competition, increasing returns and iceberg trade costs, while the other features perfect competition and constant returns. Within this framework we allow for wage, import and export subsidies/taxes. We study non-cooperative trade policies, first for each individual instrument and then for the case where all instruments are set simultaneously, and contrast those with the efficient allocation. The common wisdom of the literature1 (Venables (1987), Helpman and Krugman (1989), Ossa (2011)) is that in this model unilateral trade policy is set so as to agglomerate firms in the domestic economy in order to reduce transport costs. This reduces the domestic price index thereby increasing domestic welfare.2 According to the literature, this delocation motive (also called home market effect) provides a reason for protectionist and ultimately welfare detrimental unilateral trade policy in the Krugman (1980) model and, as argued by Ossa (2011), gives an alternative theoretical justification to the neoclassical terms-of-trade externality explanation (Johnson (1953-1954), Grossman and Helpman (1995) and Bagwell and Staiger (1999)) as to why countries need to sign trade agreements. Similarly, the same mechanism also provides a theoretical justification for the World Trade Organization (WTO)’s limitation of production and export subsidies,3 which cannot be explained within the neoclassical framework.4 By considering a situation where countries can simultaneously choose all three policy instruments (wage, import and export taxes), we contribute to the literature in three ways. First, we show that in this more general setting there are four motivesbehind non-cooperative trade policies: the correction of monopolistic distortions,5 the terms-of-trade manipulation, the delocation motive for protection, and the fiscal-burden-shifting motive. The last motive arises when countries use wage subsidies in order to correct for the monopolistic distortions. When this is the case, there is an incentive to relocate firms to the foreign economy, so as to shift the fiscal burden of the subsidy to the other country. Second, and most importantly, we show that the Nash equilibrium is characterized by the first-best level of wage subsidies, and inefficient import subsidies and export taxes. This result has several implications. It shows that, in contrast to the previous literature, the delocation motive for protection is not the dominating motive for strategic trade policy in the Krugman (1980) model once a sufficient number of policy instruments are available. This is so because countries choose to subsidize imports and tax exports with the intention to relocate firms to the other economy. It also shows that when all three policy instruments are available, the Krugman (1980) model cannot rationalize why countries would set import tariffs and export subsidies in the absence of trade agreements. Finally, following Bagwell and Staiger (1999) and Bagwell and Staiger (2009), we consider which international externalities countries try to remedy by signing trade agreements. We do so by looking atthe politically optimal policy, which is defined as the one that noncooperative policymakers would choose if they did not try to manipulate their terms of trade. We find that the politically optimal policy is still distortive. This implies that, differently from Bagwell and Staiger (2009) — who consider simultaneous choice of import and export taxes in the Krugman (1980) model — terms-of-trade externalities are not the only source of inefficiencies which trade agreements try to solve. Instead, the fiscal-burden-shifting motive — which leads to import subsidies and export taxes — is an additional externality that can be eliminated with international trade agreements. Similarly to Bagwell and Staiger (2009), we also findthat the delocation motive is not an externality which needs to be corrected by international trade agreements, when all three policy instruments are available. To clarify policymakers’ incentives, we start by considering wage subsidies/taxes as the only available policy instrument. A wage subsidy increases profits of firms in the domestic differentiated sector, and triggers a relocation of firms from the foreign to the domestic economy, thereby reducing monopolistic distortions and exploiting the delocation motive. However, this comes at the cost of a negative terms-of-trade effect because the wage subsidy reduces the international price of domestically produced varieties. We show that the balance always tips in favor of the terms-of-trade effect before monopolistic distortions are eliminated: the non-cooperative outcome is a wage subsidy that is always lower than the first-best one. Thus, the delocation effect does not induce inefficiently large wage subsidies. Instead, the terms-of-trade effect leads to an inefficiently low subsidy level. The result on wage subsidies makes it clear that the desire to eliminate monopolistic distortions is an important motive for non-cooperative policy choice. Keeping this in mind, we next study import subsidies/tariffs. First, when starting from the (inefficient) free trade allocation, both monopolistic distortions and the delocation motive for protection call for a tariff, which reduces the domestic price level. This is the case studied by Ossa (2011). Next, we consider a situation where monopolistic distortions have been eliminated by appropriate wage subsidies, so that the market allocation is first-best efficient. In this case the motives for import policy are the delocation motive and the fiscal-burden-shifting effect. It turns out that the optimal non-cooperative import policy entails import subsidies, which aim at relocating firms to the foreign economy and thereby shifting part of the subsidy burden to the other country. Thus, the fiscal-burden-shifting effect dominates the delocation motive. A similar result holds for non-cooperative export policy. When starting from the (inefficient) free trade allocation, non-cooperative policymakers set export subsidies, which are intended to induce entry into the domestic differentiated sector by relocating firms from the foreign economy and thus reduce monopolistic distortions and exploit the delocation effect. These motives dominate the negative terms-of-trade effect of export subsidies. In contrast, when monopolistic distortions have been eliminated by appropriate wage subsidies, the prevailing incentives are terms-of-trade effects and the fiscal-burden-shifting motive. Indeed, in this case the Nash equilibrium is characterized by an export tax, which aims at improving domestic terms of trade and shifting the fiscal burden of the subsidy to the other country. Finally, we analyze a situation where countries can set wage, import and export policy instruments simultaneously. This is the relevant situation if one wants to address the question of why countries need to sign trade agreements, given that in the absence of such agreements the set of tax instruments that can be used strategically is not limited to a single wage tax or trade tax instrument. In line with the above results for single instruments, we find that non-cooperative policymakers choose the level of wage subsidies that exactly offsets the monopolistic distortions, and that they set import subsidies and export taxes, which aim at improving domestic terms of trade and shifting the subsidy burden to the other country. This result is important since it clarifies that in the Krugman (1980) model, the role of international trade agreements is to solve international externalities due to both terms-of-trade effects and fiscal burden shifting motives. Delocation effects only become a relevant motive for trade policy, once the set of policy instruments is restricted.

نتیجه گیری انگلیسی

In this paper we have studied first-best and Nash trade policies in a two-sector Krugman (1980) model of intra-industry trade, considering wage, import and export taxes as policy instruments. It is common wisdom that in this model non-cooperative trade policies are set in order to try to agglomerate firms in the domestic economy, which reduces transport costs for domestic consumers thus lowering the domestic price level (delocation motive). Contrary to the results of the previous literature, we show that in this model the delocation effect is not a dominating motive for non-cooperative trade policy choices once policymakers are allowed to use wage, import and export taxes strategically. Instead, they are driven by the desire to eliminate monopolistic distortions, by the terms-of-trade externality and by the fiscal-burden-shifting externality. Indeed, due to monopolistic competition, in the free trade equilibrium there are too few firms in the differentiated sector and this affects policymakers’ incentives in a crucial way. Thus, when wage taxes are available, non-cooperative policymakers increase efficiency by setting wage subsidies. However, these subsidies are lower than the first-best ones due to negative terms-of-trade effects. When only import (export) tax instruments are available, non-cooperative policymakers use tariffs (export subsidies), which reduce the domestic price level through entry of firms in the domestic economy; thereby policymakers mitigate monopolistic distortions and exploit the delocation effect. However, once monopolistic distortions have been offset by appropriate wage subsidies, results reverse: policymakers set import subsidies (export taxes), which shift the fiscal burden of the wage subsidy to the other country and — in the case of export taxes — also improve domestic terms of trade. Finally, when policymakers can set all three policy instruments simultaneously, they choose to set wage subsidies, which exactly offset monopolistic distortions. Moreover, they set import subsidies and export taxes, which aim at shifting the subsidy burden and improving domestic terms of trade. The implications of our findings are important: in the Krugman (1980) model, both terms-of-trade externalities and fiscal burden shifting effects are reasons why countries need to sign trade agreements. Our result also shows that when all three policy instruments are available, the Krugman (1980) model cannot rationalize why countries would set import tariffs and export subsidies in the absence of trade agreements. In reality, of course, there maybe other reasons why non-cooperative policy makers may want to set tariffs – such as political economy motives for protection (see, e.g., Grossman and Helpman (1994)) – which are not present in the model. We leave such an analysis for future research. 18

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