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Optimal tariffs for the co-existence of exporting and non-exporting firms

Author

Listed:
  • Kazuhiro Takauchi

    (Faculty of Business and Commerce, Kansai University / Research Fellow, Graduate School of Economics, Kobe University)

  • Tomomichi Mizuno

    (Graduate School of Economics, Kobe University)

Abstract

We consider an optimal tariff policy with the coexistence of less efficient non-exporting and efficient exporting firms. Using a two-way oligopoly trade model with a firm's quadratic cost, we show that the optimal tariff rate is U-shaped with respect to the efficiency of non-exporting firms. This implies that under tariff competition, if relative production efficiency increases, both possibilities appear, that is, trade liberalization or protectionism can progress. We also show that the profit of the non-exporting firm can be greater than that of the exporting firm when the production efficiency of the non-exporting firm is sufficiently high.

Suggested Citation

  • Kazuhiro Takauchi & Tomomichi Mizuno, 2022. "Optimal tariffs for the co-existence of exporting and non-exporting firms," Discussion Papers 2214, Graduate School of Economics, Kobe University.
    • Handle: RePEc:koe:wpaper:2214
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    References listed on IDEAS

    as
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    5. Debashis Pal & Mark D. White, 1998. "Mixed Oligopoly, Privatization, and Strategic Trade Policy," Southern Economic Journal, John Wiley & Sons, vol. 65(2), pages 264-281, October.
    6. Chi‐Chur Chao & Eden S. H. Yu, 2006. "Partial Privatization, Foreign Competition, and Optimum Tariff," Review of International Economics, Wiley Blackwell, vol. 14(1), pages 87-92, February.
    7. Debashis Pal & Mark D. White, 1998. "Mixed Oligopoly, Privatization, and Strategic Trade Policy," Southern Economic Journal, John Wiley & Sons, vol. 65(2), pages 264-281, October.
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    More about this item

    Keywords

    Optimal tariff; non-exporting firm; Quadratic cost;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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