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Trade Policy and the Marshall–Lerner Condition: Application of the Tobit Model

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  • Masuda, Kazuto

    (Bank of Japan)

Abstract

This paper establishes the micro-foundation for the income-price approach to export and import functions from the firm’s profit maximization problem. Following Boyd et al. (2000), we derive the Marshall–Lerner condition mathematically and analyze the effects of home and foreign trade policies, such as the minimum access and quantitative trade restriction, on the Marshall–Lerner condition. In conclusion, such trade policies make the condition theoretically difficult to hold since the marginal effects of the Tobit estimates under deterministic trade policies are always lower than the ordinary least squares (OLS) estimates under no trade policies in absolute values.

Suggested Citation

  • Masuda, Kazuto, 2021. "Trade Policy and the Marshall–Lerner Condition: Application of the Tobit Model," SocArXiv njzk3_v1, Center for Open Science.
    • Handle: RePEc:osf:socarx:njzk3_v1
    DOI: 10.31219/osf.io/njzk3_v1
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    References listed on IDEAS

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