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Whether to Choose Tariffs or Subsidies to Protect a Domestic Industry
( Dominik Egli ),( Frank Westermann ) 세종대학교 경제통합연구소 (구 세종대학교 국제경제연구소) 2003 Journal of Economic Integration Vol.18 No.1
The use of tariffs in the absence of subsidies in small countries is an empirical observation which stands in sharp contrast to the theoretical literature of trade policy. We analyze the welfare effects of tariffs and subsidies in a homogeneous good duopoly game with cost asymmetries between the two firms, allowing for distortionary taxation. We find that for reasonable values of the distortion parameter or for a large cost disadvantage of the home firm, a tariff is the optimal policy tool.
Whether to Choose Tariffs or Subsidies to Protect a Domestic Industry
Egli, Dominik,Westermann, Frank 세종대학교 국제경제연구소 2003 Journal of Economic Integration Vol.18 No.1
The use of tariffs in the absence of subsidies in small countries is an empitical observation which stands in sharp contrast to the theoretical literature of trade policy. We analyzw the welfare effects of tariffs and subsidies in a homogeneous good duopoly game with cost asymmetries between the two firms, allowing for distortionary taxation. We find that for reasonable values of the distortion parameter or for a large cost disadvantage of the home firm, a tariff is the optimal policy tool.