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ALTERNATIVE OPTIMAL TRADE POLICIES IN THE PRESENCE OF FOREIGN INPUT MONOPOLY
Author(s) -
Hwang Hong,
Lin Yanshu,
Mai Chaocheng
Publication year - 2003
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/j.1468-0106.2003.00221.x
Subject(s) - tariff , economics , monopoly , distortion (music) , upstream (networking) , international economics , downstream (manufacturing) , international trade , microeconomics , monetary economics , amplifier , computer network , operations management , cmos , electronic engineering , computer science , engineering
. This paper develops a generalized three‐country model with downstream and upstream industries to analyze optimal import and export trade policies in the presence of monopoly distortion in a foreign intermediate input market. It shows that the import tariff and export tax are linearly dependent. Thus, the optimal choice of the tariff gives rise to the same results as the optimal choice of the export tax, which implies that the domestic government, to avoid tariff retaliation, can use export tax as a substitute for the import tariff.