Endogenous Quality Effects of Trade Policy

Arbeitspapier

We study the optimal trade policy against a foreign oligopoly withendogenous quality. We show that, under the Most Favoured Nation(MFN) clause, a uniform tariff policy is always welfare improvingover the free trade equilibrium. However, a nonuniform tariff policyis always desirable on welfare grounds. First best policy typicallyconsists of setting a subsidy on the low-quality product and a tax onhigh-quality one. Another example of such a nonuniform tariff policyis a Regional Trade Agreement (RTA). We show that, if a welfareimprovement is possible through a RTA, it is always with the low-quality producing country that it has to be achieved.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 99-094/2

Classification and Topics

• Classification: Wirtschaft ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Trade Policy; International Trade Organizations ; Economic Integration
• Subject: Endogenous Quality ; Hedonic Prices ; Most Favored Nation (MFN) clause ; Optimal Tariff ; Regional Trade Agreement (RTA) ; Außenwirtschaftspolitik ; Produktqualität ; Hedonischer Preisindex ; Zollpolitik ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Moraga, Jose Luis ; Viaene, Jean-Marie
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 1999

Further information

• Handle: http://hdl.handle.net/10419/85575
• Last update: 10.03.2025, 11:45 AM CET