Endogenous Timing in Trade Policy Under the Three-Country Model
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This chapter provides a comprehensive and consistent explanation for the following result: a government with a smaller number of firms becomes a leader and provides a subsidy to home firms, whereas a government with a larger number of firms moves second and imposes a tax on domestic firms in the three-country model. This chapter also presents a comparison of the welfare of each country under free trade and under bilateral intervention, from which we derive policy implications.
KeywordsStrategic trade policy Endogenous timing Strategic distortion Terms of trade distortion Welfare comparison
This chapter is a revised version of Ohkawa et al. (2002). We appreciate that Edward Elgar gave me permission to reuse our volume. This work was supported by Grants-in-Aid for Scientific Research (no. 23530303 and 26380340). All remaining errors are ours.
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