Protection for Sale under Monopolistic Competition
This paper broadens the protection for sale model of Grossman and Helpman (1994) by incorporating the Krugman–Dixit–Stiglitz model of monopolistic competition, given its importance in explaining the prevalence of intraindustry trade. Several new results arise in this paper. First, the endogenous import tariff will never fall below zero, even in unorganized sectors. Second, the endogenous export policy for organized sectors is not necessarily an export subsidy, and can be an export tax as in unorganized sectors. Third, the level of import protection varies inversely with the degree of import penetration, regardless of whether the sector is organized or not.
Trade policy; Political economy; Protection for sale; Monopolistic competition; Intraindustry trade
Journal of International Economics
Chang, Pao Li.
Protection for Sale under Monopolistic Competition. (2005). Journal of International Economics. 66, (2), 509-526. Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/77
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