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IS AN EXPORT SUBSIDY A ROBUST TRADE POLICY RECOMMENDATION TOWARD A UNIONIZED DUOPOLY?
Author(s) -
MA JIE
Publication year - 2008
Publication title -
economics and politics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.822
H-Index - 45
eISSN - 1468-0343
pISSN - 0954-1985
DOI - 10.1111/j.1468-0343.2007.00326.x
Subject(s) - subsidy , duopoly , robustness (evolution) , economics , politics , welfare , commercial policy , government (linguistics) , rent seeking , public policy , protectionism , international economics , microeconomics , market economy , biochemistry , chemistry , linguistics , philosophy , political science , law , gene , economic growth
Brander and Spencer (1988) and Bandyopadhyay et al. (2000) imply that the robust trade policy recommendation toward a unionized duopoly is an export subsidy. In this paper, we show that we cannot get such a result even in the linear case if the opportunity cost of public funds is sufficiently high. However, if we consider the case where the domestic firm and the trade union lobby the government to set favorable trade policies by giving the government political contributions, then the result of robustness will be restored if the government cares about political contributions sufficiently relative to national welfare.