Now showing 1 - 3 of 3
  • Publication
    Royale with cheese : the effect of globalization on the variety of goods
    (University College Dublin. School of Economics, 2010-07) ;
    The key result of the so-called “New Trade Theory” is that countries gain from falling trade costs by an increase in the number of varieties available to consumers. Though the number of varieties in a given country rises, it is also true that global variety decreases from increased competition wherein imported varieties drive out some local varieties. This second result is a major issue for anti-trade activists who criticize the move towards free trade as promoting “homogenization” or “Americanization” of varieties across countries. We present a model of endogenous entry with heterogeneous firms which models this concern in two ways: a portion of a consumer’s income is spent overseas (i.e. tourism) and an existence value (a common tool in environmental economics where simply knowing that a species exists provides utility). Since lowering trade costs induces additional varieties to export and drives out some non-exported varieties, these modifications result in welfare losses not accounted for in the existing literature. Nevertheless, it is only through the existence value that welfare can fall as a result of declining trade barriers. Thus, for these criticisms of globalization to dominate, it must be that this loss in the existence value outweighs the direct benefits from consumption.
  • Publication
    Optimal tariffs, tariff jumping, and heterogeneous firms
    (University College Dublin. School of Economics, 2009-10-22) ;
    The majority of research to date investigating strategic tariffs in the presence of multinationals finds a knife-edge result where, in equilibrium, all foreign firms are either multinationals or exporters. Utilizing a model of heterogeneous firms, we find equilibria in which both pure exporters and multinationals coexist. We utilize this model to study the case of endogenously chosen tariffs. As is standard, Nash equilibrium tariffs are higher than the socially optimal tariffs. Unlike existing models with homogeneous firms, we find that non-cooperative tariffs promote the existence of low-productivity firms relative to the socially optimal tariffs. This highlights a new source of inefficiency from tariff competition not found in models of homogeneous firms. In addition, we find that in many cases the Nash equilibrium tariff when FDI is a potential firm structure is lower than when it is not. As a result, FDI improves welfare by mitigating tariff competition.
  • Publication
    Foreign bidders going once, going twice... Protection in government procurement auctions
    (University College Dublin. School of Economics, 2014-02) ;
    Until recently, government procurement bidding processes have generally favored domestic firms by awarding the contract to a domestic firm even if a foreign firm tenders a lower bid, so long as the difference between the two is sufficiently small. This has been replaced by an agreement abolishing this practice. However, the presence of other trade barriers, such as tariffs, can continue to disadvantage foreign firms. We analyze the bidding strategies in such a game and show that when domestic profits are valued, tariffs will be used to discriminate against foreign firms. Furthermore, we find that optimal tariffs can be more protectionist than the optimal price preference, resulting in lower expected domestic welfare and total surplus.