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Economic geography with tariff competition

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  • Mai, Chao-Cheng
  • Peng, Shin-Kun
  • Tabuchi, Takatoshi

Abstract

A simple two-country model of economic geography is constructed in order to examine the effect of tariff competition on the spatial distribution of manufacturing activities as well as on welfare. We show that when the transport cost is small, tariff competition with firm migration leads to a core-periphery economy, where one of the two countries imposes no tariff in Nash equilibrium. We also show that when the transport cost is sufficiently large, both countries impose a positive tariff, which decreases the welfare of both countries.

Suggested Citation

  • Mai, Chao-Cheng & Peng, Shin-Kun & Tabuchi, Takatoshi, 2008. "Economic geography with tariff competition," Regional Science and Urban Economics, Elsevier, vol. 38(5), pages 478-486, September.
    • Handle: RePEc:eee:regeco:v:38:y:2008:i:5:p:478-486
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    6. Takatoshi Tabuchi & Kristian Behrens & Andrea R. Lamorgese, 2004. "Testing the Home Market Effects in a Multi-country World: The Theory," Econometric Society 2004 Far Eastern Meetings 595, Econometric Society.
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    Cited by:

    1. Takatsuka, Hajime & Zeng, Dao-Zhi, 2016. "Nontariff protection without an outside good," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 65-78.
    2. María Pilar Martínez-García & José Rodolfo Morales, 2019. "Resource effect in the Core–Periphery model," Spatial Economic Analysis, Taylor & Francis Journals, vol. 14(3), pages 339-360, July.
    3. Oyama, Daisuke, 2009. "Agglomeration under forward-looking expectations: Potentials and global stability," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 696-713, November.
    4. Yukiko Sawada, 2017. "The effect of technology choice on specialization and welfare in a two‐country model," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(4), pages 1104-1129, November.
    5. Hajime Takatsuka & Dao‐Zhi Zeng, 2022. "Mobile capital, optimal tariff, and tariff war," Review of International Economics, Wiley Blackwell, vol. 30(1), pages 166-204, February.
    6. Fu-Chuan Lai, 2019. "Special feature in honor of Shin-Kun Peng," Asia-Pacific Journal of Regional Science, Springer, vol. 3(3), pages 757-759, October.
    7. Masafumi Tsubuku, 2018. "Impacts of globalization on tariff settings," International Economics and Economic Policy, Springer, vol. 15(1), pages 117-129, January.
    8. Jun Oshiro, 2011. "Tariff Policy and Transport Costs under Reciprocal Dumping," Discussion Papers in Economics and Business 11-17, Osaka University, Graduate School of Economics.

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