Economics Dictionary of ArgumentsHome
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| International trade: International trade is the exchange of goods, services, and capital across borders. It allows countries to specialize in production, benefit from comparative advantage, and access a wider market. Trade can be influenced by tariffs, quotas, and trade agreements, impacting economic growth, employment, and globalization. See also Trade, International relation, International policies, Tariffs, Competition, Specialization, Economic growth._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Anthony J. Venables on International Trade - Dictionary of Arguments
Krugman III 61 Welfare gains/tariffs/taxation/international trade/Venables: The simulations reported in this paper study* the welfare implications of two trade policy instruments, an import tariff and an export tax. The effects of these instruments are examined in a family of models of trade under imperfect competition, applied to nine industries in the European Community. >Imperfect competition, >Trade policies, >International trade, >New trade theory. From the large number of simulations undertaken, what conclusions can be drawn? 1) The first message to emerge from the simulations is the small size of the welfare gains that can be derived from use of these policy instruments. Under oligopoly there is only one industry in which tariffs yield welfare gains in excess of 2.5 percent of the base value of consumption of the industry’s output. >Oligopolies, >Monopolistic competition. Taking simple averages across industries and equilibrium types we see that the gains from tariffs of 5, 10, 15, and 20 percent average out at 0.48, 0.81, 0.99, and 0.82 percent of base consumption, respectively. With free entry the average gains are somewhat larger, at 0.66, 0.88, 1.05, and 1.00 percent of base consumption for these tariff rates. Export subsidies give even smaller welfare gains, only reaching 1 percent of base consumption in a few of the cases studied. Under oligopoly the net welfare figure is the difference between increases in firms’ profits and losses for either consumers or government. This means that if these components of welfare were weighted differently, then results could easily be changed. For example, attaching a premium to government revenue would strengthen the case for import tariffs and rapidly destroy the case for export subsidies. 2) Interventions: The second message from the simulations is that, looking across industries, the gains from policy intervention are greater the more concentrated the industry. This is as would be expected. Tariff policy offers welfare gains for all industries studied, these gains arising both from the distortions associated with imperfect competition and from standard terms of trade effects. Export subsidies: The effect of export subsidies is more varied across industries, with only three of the nine industries studied giving unambiguous welfare gains from a 4 percent export subsidy, these three being industries with a relatively high level of concentration. The reason for the greater ambiguity in the effects of export subsidies is, of course, that the effect of the policy on distortions and its effect on the terms of trade work in opposite directions. Another industrial characteristic that is important in determining the effects of an export subsidy is the base volume of exports. An industry with a large volume of exports will incur a heavy revenue cost of subsidizing existing exports, in order to achieve the marginal expansion in exports, and is therefore less likely to generate welfare gains from the export subsidy. 3) Quantity effects: Third, although the welfare gains from these policies are relatively small, the quantity effects are quite large. Krugman III 62 Tariffs: Some part of a tariff is absorbed by the supplying firm, but the larger part is passed on to consumers, and with elasticities of demand for individual models at the levels reported (…) the order of magnitude of the quantity effect is apparent. Quantity effects are particularly large in the case of trade-promoting policies-export subsidiessince they permit exporters to undercut firms in their home markets and lead, in some cases, to some degree of international specialization of production. Trade policy: This suggests that in order to adequately capture the effects of trade policy, models of imperfect competition need to be put into a general equilibrium framework. Factor price changes would then reduce the size of quantity changes and reduce the likelihood of specialization. >Factor price, >Specialization. 4) Equilibrium: Fourth, the simulations of this paper explored a number of different equilibrium concepts: from the case of price competition (B) to the less competitive behavior implied by Cournot equilibrium (C)**, from pure market segmentation to pure integration (CI), as well as the intermediate case of integrated-market Cournot competition followed by segmented-market price games (CB). These cases cover a wide range of possible behavior, although it cannot be claimed that actual industry behavior is necessarily within the range spanned by these cases-for example, the industry may be more collusive than is implied by Cournot behavior. The four different equilibria studied lead to significantly different interpretations of the base data sets, as calibration generated different elasticities of demand, in each case, and different levels of the implicit barriers to trade. >Equilibrium, >Trade, >Oligopolies, >Trade policies/Venables. * See below: „Anthony J. Venables. „Trade Policy….“ ** ((s) In the economics of oligopoly, the Cournot and Bertrand models explore different ways firms can compete. Cournot models focus on quantity competition, where firms choose output levels, while Bertrand models focus on price competition, where firms set prices. In Bertrand competition, firms making identical products often reach an equilibrium where prices are equal to marginal costs, leading to zero economic profits. In contrast, Cournot competition typically leads to higher prices and positive profits for firms, as they limit their output to maximize profits.) Anthony J. Venables. „Trade Policy under Imperfect Competition: A Numerical Assessment.“In: Paul Krugman and Alasdair Smith (Eds.) 1994. Empirical Studies of Strategic Trade Policy. Chicago: The University of Chicago Press._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Venables, Anthony J. EconKrug I Paul Krugman Volkswirtschaftslehre Stuttgart 2017 EconKrug II Paul Krugman Robin Wells Microeconomics New York 2014 Krugman III Paul Krugman Alasdair Smith Empirical Studies of Strategic Trade Policy Chicago: The University of Chicago Press 1994 |
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> Counter arguments against Venables
> Counter arguments in relation to International Trade
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