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From Inefficient Behind-The-Border Policies to Inefficient Trade Agreements: A Two-Tier Asymmetric Information Model

Author

Listed:
  • Antoine Bouët

    (IFPRI - International Food Policy Research Institute [Washington] - CGIAR - Consultative Group on International Agricultural Research [CGIAR], GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique)

  • David Laborde

    (IFPRI - International Food Policy Research Institute [Washington] - CGIAR - Consultative Group on International Agricultural Research [CGIAR])

  • David Martimort

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We consider a general equilibrium model of international trade with two layers of informational asymmetries. Private information of Home producers on costs affects the design of "behind-the-border" policies reflecting the political influence of inefficient producers. Home's supply is contracted, causing trade, and motivating the use of tariffs. Eliminating those instruments by means of a trade agreement may become impossible once Home has also private information on its redistributive concerns. Home, when subject to strong influence by inefficient producers, might be reluctant to adopt Free Trade, which may lead to limited tariff cuts and give a role for export subsidies.

Suggested Citation

  • Antoine Bouët & David Laborde & David Martimort, 2021. "From Inefficient Behind-The-Border Policies to Inefficient Trade Agreements: A Two-Tier Asymmetric Information Model," Post-Print halshs-02973313, HAL.
    • Handle: RePEc:hal:journl:halshs-02973313
    DOI: 10.1093/ej/ueaa085
    as

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