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A Simple Model of Trade with Heterogeneous Firms and Trade Policy

Author

Listed:
  • Fukushima, Marcelo
  • Kikuchi, Toru

Abstract

This paper builds a Ricardian-Chamberlinian two-country model with heterogeneous firms in a monopolistically competitive sector in which every new entrant faces increasing fixed costs of production. There are efficiency gaps between countries in marginal and fixed costs and a country unilaterally imposes an import tariff. It is shown that an increase in tariff increases the number of firms of the tariff imposing country while decreases the number of firms of the tariff-imposed country, possibly reverting the position of net exporter of varieties. A tariff is detrimental to the tariff-imposed country. A small tariff may be beneficial to the tariff-imposing country.

Suggested Citation

  • Fukushima, Marcelo & Kikuchi, Toru, 2008. "A Simple Model of Trade with Heterogeneous Firms and Trade Policy," MPRA Paper 9573, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:9573
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    File URL: https://mpra.ub.uni-muenchen.de/9573/1/MPRA_paper_9573.pdf
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    References listed on IDEAS

    as
    1. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
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    Cited by:

    1. Matsuoka, Yuji & Fukushima, Marcelo, 2009. "Time Zones, Shift Working and Outsourcing through Communications Networks," MPRA Paper 13355, University Library of Munich, Germany.
    2. Matsuoka, Yuji & Fukushima, Marcelo, 2010. "Time zones, shift working and international outsourcing," International Review of Economics & Finance, Elsevier, vol. 19(4), pages 769-778, October.

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    More about this item

    JEL classification:

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

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