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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Kathleen Hogan on International Trade - Dictionary of Arguments
Krugman III 14 International trade/Kala Krishna/Kathleen Hogan/Phillip Swagel: We extend Dixit (1988)(1) by allowing for product differentiation among home and foreign firms, as opposed to Dixit’s assumption that all firms in a country produce the same good. >Calibration/Kala Krishna, >Dixit/Kala Krishna, >Trade policies/Economic theories. This is important, since Dixit’s results, which suggest that behavior lies between Cournot and Bertrand*, could be a result of this assumption. With homogeneous goods and many firms, any markup over cost implies behavior more collusive than that of Bertrand oligopolists. The richer specification allows changes in the parametrization to affect not only the magnitude of the optimal tariff, but also the sign. In contrast, Dixit’s parametrization restricts tariffs and subsidies to be positive.** >Elasticity/Kala Krishna, >Cournot Competition, >Bertrand Competition. Krugman III 28 Optimal trade policy/labour rents: compare the jointly optimal subsidy when there are no labor rents to the case with labor rents. The optimal policy with rents involves a higher subsidy on production than without. This is to be expected, as the presence of rents makes domestic production more desirable. Also notice that the optimal tariff changes only very slightly. This suggests a targeting interpretation. The presence of labor rents distorts production, as firms produce too little, both because they have monopoly power and because they do not take labor rents into account in their production decisions. Hence the optimal policy to correct this distortion is a domestic production subsidy, which targets the domestic distortion directly, rather than a trade policy, which targets the distortion only indirectly. Optimal tariff: When the production subsidy is unavailable, the optimal tariff in the presence of labor rents is positive for all years, as opposed to the import subsidy typically optimal in the absence of labor rents. Again this is expected, as the tariff must partly do the job of the unavailable production subsidy, and the higher tariff encourages domestic production. The presence of labor rents thus dramatically changes the nature of the optimal policies. >Optimal tariffs. * ((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.) ** In Dixit’s model, welfare increases with a subsidy or a tariff from an initial position of zero tariffs and subsidies. With a well-behaved welfare function this implies that the optimal tariff and subsidy is positive. Kala Krishna, Kathleen Hogan, and Phillip Swagel. „The Nonoptimality of Optimal Trade Policies: The U.S. Automobile Industry Revisited, 1979-1985.“ 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. |
Hogan, Kathleen | ||
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