Protection for Sale, Monopolistic Competition and Variable Markups

Marvasi, Enrico (2013): Protection for Sale, Monopolistic Competition and Variable Markups.

Abstract

We extend the basic model of trade protection with special interest groups developed in Grossman and Helpman (1994) to include monopolistic competition with variable markups. We find the following results: (i) for sectors organized into lobbies the endogenous import tariff is always positive and inversely related to the degree of import penetration; (ii) for unorganized sectors the endogenous import policy may be a tariff or a subsidy, depending on the policy implemented by the partner country; (iii) the endogenous export policy consists in an export tax for unorganized sectors and in a subsidy for organized sector provided that goods are suffciently differentiated.

• Item Type: MPRA Paper
• Language: English
• Keywords: Endogenous Trade Policy; Protection for Sale; Monopolistic Competition; Variable Markups.
• Subjects: F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies ; Fragmentation; F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations

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