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| Author: | Collie, D. R. |
| Title: | Bilateralism is good: Trade blocks and strategic export subsidies |
| Journal: | Oxford Economic Papers
1997 : OCT, Vol. 49:4, p. 504-520 |
| Index terms: | BILATERAL TRADE EXPORTING SUBSIDIES |
| Language: | eng |
| Abstract: | This paper considers the effect of exogenous trade block enlargement in a multi-country version of the Brander-Spencer export subsidy game. In the single-shot game, it is shown that trade bloc enlargement leads to a reduction in the Nash equilibrium export subsidies and thereby increases the welfare of exporting countries. Although the welfare of the importing coutries decreases, world welfare may increase if the export subsidies are financed by distortionary taxation. When the export subsidy game is infinitely repeated, it is shown that trade block enlargement reduces the critical discount factor making it easier to sustain free trade. |
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