A general framework for analysing endogenous trade divergences

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Title: A general framework for analysing endogenous trade divergences
Authors: Walsh, Patrick P.
Permanent link: http://hdl.handle.net/10197/998
Date: Nov-1991
Abstract: This paper gives a general framework for analyzing a trade divergence that runs across both the New International trade theory and the traditional analysis of export policy. The source of the trade divergence, the motive for intervention and the analytical framework is shown to be the same in all models. The sign of the trade divergence and hence the policy recommendation is determined by the market structure chosen to endogenise the divergence. The magnitude of the subsidy in all models is determined by the maximum potential profitability of the home industry. It is argued that interpretations based on "profit shifting" or on a "terms of trade improvement" as a motive for trade intervention are misleading.
Type of material: Working Paper
Publisher: Suntory and Toyota International Centres for Economics and Related Disciplines
Series/Report no.: STICERD Economics of Industry Papers; EI/04
Copyright (published version): Copyright by Patrick Walsh
Keywords: Endogenous trade divergencesInterventionSubsidyProfit shiftingTerms of trade improvementProfitabilityTrade theoryExport policy
Subject LCSH: International trade
Export subsidies
Other versions: http://sticerd.lse.ac.uk/dps/ei/ei04.pdf
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Politics and International Relations Research Collection
Geary Institute Research Collection

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