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Two-Country Trade Liberalization in an Address Model of Product Differentiation

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  • Nicolas Schmitt

Abstract

This paper investigates the effects of reciprocal tariff reductions in a two-identical country model of product differentiation. It makes three points. First, the existing results about market structure effects of trade liberalization can easily be replicated from a one-dimensional characteristic space model in which the prohibitive tariff rate is endogenously determined. Secondly, these effects depend crucially on the initial ad valorem tariff rate. Thirdly, reciprocal tariff reductions alone do not necessarily warrant welfare gains.

Suggested Citation

  • Nicolas Schmitt, 1990. "Two-Country Trade Liberalization in an Address Model of Product Differentiation," Canadian Journal of Economics, Canadian Economics Association, vol. 23(3), pages 654-675, August.
    • Handle: RePEc:cje:issued:v:23:y:1990:i:3:p:654-75
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    Cited by:

    1. Jørgensen, Jan G. & Schröder, Philipp J.H., 2008. "Fixed export cost heterogeneity, trade and welfare," European Economic Review, Elsevier, vol. 52(7), pages 1256-1274, October.
    2. Hernan Vallejo, 2006. "International trade, migration and investment with horizontal product differentiation and free entry and exit of firms," Revista de Economía del Rosario, Universidad del Rosario, November.
    3. Barros, Pedro Pita & Martinez-Giralt, Xavier, 1999. "On the effects of antidumping legislation," Regional Science and Urban Economics, Elsevier, vol. 29(1), pages 53-72, January.
    4. Carlos A. Cinquetti & Keith Maskus & Ricardo G. Silva, 2011. "A Comprehensive Empirical Analysis of Trade Policy for a Small Country with Monopolistic Competition," EcoMod2011 3399, EcoMod.
    5. Yu-Ter Wang, 2007. "The number of firms, international product differentiation and an import tariff," Applied Economics Letters, Taylor & Francis Journals, vol. 14(14), pages 1087-1089.
    6. Carlos A. Cinquetti & Keith E. Maskus, 2013. "A Comprehensive Empirical Analysis of Trade Policy with Monopolistic Competition in a Small Country," EcoMod2013 5398, EcoMod.
    7. Andaluz, Joaquin, 2000. "On protection and vertical product differentiation," Regional Science and Urban Economics, Elsevier, vol. 30(1), pages 77-97, January.
    8. Kevin Wiseman, 2010. "Location, Productivity, and Trade," 2010 Meeting Papers 671, Society for Economic Dynamics.
    9. L. Lambertini, 2002. "the Specialization of Production and Labour Mobility Under Endogenous Differentiation," Working Papers 453, Dipartimento Scienze Economiche, Universita' di Bologna.

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