A Simple Model of Trade with Heterogeneous Firms and Trade Policy
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We build a Chamberlinian-Ricardian two-country-two-sector model with heterogeneity of firms in terms of fixed costs and analyze the effects of trade policy. We consider efficiency gaps between countries in marginal and fixed costs, a monopolistically competitive sector in which every new entrant faces increasing fixed costs of production. It is shown that an increase in a unilaterally imposed tariff increases the number of firms of the tariff-imposing country and decreases the number of firms of the tariff-imposed country, possibly reverting the position of net importer to net exporter of varieties. A small tariff is likely to be beneficial to the tariff-imposing country when fixed costs are low in both countries and the tariff-imposing country is relatively efficient in terms of fixed costs.
Abstract
We build a Chamberlinian-Ricardian two-country-two-sector model with heterogeneity of firms in terms of fixed costs and analyze the effects of trade policy. We consider efficiency gaps between countries in marginal and fixed costs, a monopolistically competitive sector in which every new entrant faces increasing fixed costs of production. It is shown that an increase in a unilaterally imposed tariff increases the number of firms of the tariff-imposing country and decreases the number of firms of the tariff-imposed country, possibly reverting the position of net importer to net exporter of varieties. A small tariff is likely to be beneficial to the tariff-imposing country when fixed costs are low in both countries and the tariff-imposing country is relatively efficient in terms of fixed costs.
참고문헌 (8)
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