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Regulatory Entry Barriers, Rent Shifting and the Home Market Effect
Author(s) -
Tobal Martín
Publication year - 2017
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12256
Subject(s) - economic rent , relocation , economics , welfare , international economics , trade barrier , production (economics) , barriers to entry , home market , intervention (counseling) , labour economics , market structure , market economy , microeconomics , psychology , psychiatry , computer science , programming language
This paper introduces regulatory entry barriers in a model of the home market effect. The entry barriers generate local rents that have unexpected but significant implications. First, the home market effect is magnified. Second, when countries are sufficiently unequal in size and rents are sufficiently large, symmetric reductions in trade costs reduce welfare in the small country. Third, entry barriers increase the large country's market size and, surprisingly, can increase its welfare. Fourth, a unilateral increase in trade protection shifts foreign rents to the home country. This rent‐shifting effect amplifies the standard production relocation motive for trade policy intervention.