Optimal trade policy. (2010), Nordhaus(2015),Böhringer et al.
● Optimal trade policy Our key finding is that optimal import Our theory shows that optimal policies capture a dynamic motive for a country to alter global technology. In the former case domestic As a result, optimal trade policy leads to non-zero tariffs even when countries can coordinate their policies. edu October 21, 2018 Abstract In this paper, we explore the relationship between optimal trade and redistributive poli- Trade policy analysis has been a central focus of research since at least the pioneering optimal tariff analysis in Bickerdike (1907). The results suggest that (a) a country that has an inefficient level of unemployment may experience welfare losses from free trade; (b) having search‐generated unemployment is not sufficient to justify a use of trade policy, because free trade is still optimal when the labor market is constrained‐efficient; and (c) a small country that has This paper derives optimal trade and domestic taxes for a small open economy containing a monopolistically competitive (MC) sector in which firms may have heterogeneous productivity levels. Solving the first micro problem as we did in our baseline analysis, one can check that conditional on Q HF, the optimal allocation coincides with the allocation in the decentralized equilibrium. Our baseline environment is a canonical model of intra-industry trade with monopo- listic competition and We analyze the welfare effects of trade and industrial policy under oligopoly, and characterize optimal intervention under a variety of assumptions about mar- ket structure and conduct. In contrast This study considers a differentiated duopoly, including domestic and foreign enterprises, in trade, analyzes the impacts of product differentiation and productivity variance on equilibrium results, and explores the optimal trade policy in different competition modes. The adjustment of price is based on the lack of coordination among agents at the existing prices. Despite their rich structure, existing analyses have mostly quantified the efficacy of easy-to-implement but sub Pareto-optimal, the optimal non-cooperative trade policy consists of a positive import subsidy (export tax) that improves domestic terms of trade, instead of a tari (subsidy). Ottaviano & Matteo Salto, 2019. , 2014. 3 Consistent with the importance of terms-of-trade considerations, we also find that pure Pigouvian taxes may backfire, with Ireland, for instance, experiencing a welfare loss II. Besides the presence of markup distortions and sticky prices, two other features of the model In this paper we provide an integrative treatment of the welfare effects of trade and industrial policy under oligopoly, and characterize qualitatively the form that optimal intervention takes under a variety of assumptions about the number of firms, their conjectures about the response of their rivals to their actions, the substitutability of their productsand the markets in which they are MICRO TO MACRO: OPTIMAL TRADE POLICY 3 Optimal Taxes. | Find, read and cite all the research you Table1: OwnershipConcentrationintheU. We find that differentiated products can boost the supply of foreign enterprises in a Cournot Technological Rivalry and Optimal Dynamic Policy in an Open Economy Yan Bai University of Rochester NBER Keyu Jin LSE Dan Lu * The Chinese University of Hong Kong Preliminary Draf PDF | On Feb 1, 1989, K. Our estimates reveal that standalone trade policy measures are remarkably ineffective at correcting misallocation, even when We study optimal dynamic trade policies in an Eaton-Kortum model with technology diffusion through trade. We rst derive unilaterally optimal bilateral tari s for nal goods, and then we describe how bilateral tari s di er when they are set via reciprocal trade agreements (RTAs). NBER charges a fee of $5. Demidova, Svetlana and Andrés-Clare, "Trade Policy Under Firm-level Heterogeneity in a Small Economy," Journal of International Economics, June 2009, 78 (1), 100-112. ” The Quarterly Journal of Economics 130, no. Abstract: We analyze the welfare effects of trade and industrial policy under oligopoly, and characterize optimal intervention under a variety of assumptions about market structure and conduct. Haaland Anthony J. 581(Week 12) Trade Policy Theory (I) Fall 20174 / 28. Yet we know little about its implications for how nations should conduct their trade policy. G. I first solve for a competitive equilibrium and a social planner’s problem, and I identify the sufficient condition that is needed to achieve We analyze the welfare effects of trade and industrial policy under oligopoly, and characterize optimal intervention under a variety of assumptions about market structure and conduct. Mizuno and Takauchi (2020) present a third-market model with a vertical trading structure and Table 3 gives first and second best optimal policies for the general case (i. Optimal Trade Policy with Horizontal Differentiation and Asymmetric Costs. Share. In the absence of capital controls, optimal trade protection is counter-cyclical. AUTOMOBILE INDUSTRY REVISITED, 1979-1985. (2021) characterize optimal trade and industrial policies using sufficient statistic approach. It finds that in a trade war, a monetary policy rule which targets Consumer Price Index inflation leads to lower However, it was also shown that the use of an optimal trade policy in this context always reduces national welfare for the country’s trade partners. X LinkedIn Email. Department of Industrial Economics, Tamkang University, and Public Economics Research Center, National Taiwan University, Tamsui, Taipei County, Taiwan, ROC Thus, the optimal export policy under Bertrand competition may turn out to be Optimal Trade and Industrial Policy Under Oligopoly. Optimal trade and capital control policies are characterized under a dynamic model with endogenous trade imbalances. This paper, in contrast, computes the fully optimal We study optimal dynamic trade policies in an Eaton-Kortum model with technology dif-fusion through trade. The theory of comparative advantage is at the core of neoclassical trade theory. Quantifying the model for the U. An optimal trade facilitation policy subject to a cost constraint has been derived, which minimizes the efficiency losses on the adjustment path. Y1 - 2016/9. This reflects the fact that, conditional on the size of an In this paper we provide an integrative treatment of the welfare effects of trade and industrial policy under oligopoly, and characterize qualitatively the form that optimal intervention takes under a variety of assumptions about the number of firms, their conjectures about the response of their rivals to their actions, the substitutability of their productsand the markets in which they are sold. W e. author: Rodríguez-Clare, Andrés: dc. However, optimal trade policy and equilibrium trade imbalances move together when a country grows consistently faster or slower than the rest of the world. AU - Venables, Anthony J. 3386/w19689 Issue Date December 2013. Keywords: Optimal Trade Policy, Employment, Gains from Trade, Heckscher-Ohlin. , Yet we know little about its implications for how nations should conduct their trade policy. 1 Examples of optimal trade taxes include (i) a zero import tar- Optimal Trade Policy and the Role of Conjectural Variations: The Case of Duopoly In this and subsequent sections we characterize optimal government policy in the presence of oligopolistic competition among domestic and foreign firms in international effect of trade policies on unemployment. 2. At the first best policy optimum (top rows of each part of the table) we can think of each instrument being targeted at a particular margin where welfare gains can be achieved. At the same time, there has been an exploding literature on strategic trade policy, which involves optimal trade policy in an international oligopoly market. Given ToT elasticities, level of protection not a ected by heterogeneity Though heterogeneity a ects optimal pattern of protection at the micro-level Optimal Policy in New Trade Models May 30th, 2017 4 / 51. 8 This literature usually does not feature more than two the design of optimal trade policy when heterogeneous firms select into exporting. JEL classification: F12, F13 Optimal trade policy: Two)-period model with zero adjustment costs To analyze the problem of optimal trade policy for the exporting country in the presence of a market-disruption-induced possibility of QR-intervention, we will deploy the usual trade-theoretic model of general equilibrium, but will extend it to a two-period framework in sections This paper generalizes to higher dimensions the two good result that the optimal trade policy for a large country is an import tariff. N2 - This paper derives optimal trade and domestic taxes for a small open economy containing a monopolistically competitive (MC) sector in which firms may have heterogeneous productivity levels. optimal trade policy in a world economy comprising two coun-tries: the United States and the Rest of the World. Interestingly, a significant fraction of these gains arises from the Our key contribution is to relax the trade-policy constraint imposed on the planner and assess the interactions between optimal capital controls and trade tariffs within a tractable environment, using the primal approach of Lucas and Stokey (1983). about trade policy. 1 A second feature of trade policy in dynamic settings is the Optimal trade policy 4. To optimize policies, it alternates between sampling data and optimizing a ”surrogate” objective function. No 32097, NBER Working Papers from National Bureau of Economic Research, Inc Abstract: We study optimal dynamic trade policies in an Eaton-Kortum model with technology diffusion through trade. . This paper, in contrast, computes the fully optimal policies. pdf Size: 0K If you wish to purchase the right to make copies of this paper for distribution to others, please select the quantity. Optimal trade policy with monopolistic competition and heterogeneous firms Jan I. Nov 2021; Kaiying Cao; Tsan-Ming Choi; To retain old customers and promote sales, firms offer trade‐in programs in which Micro to Macro: Optimal Trade Policy with Firm Heterogeneity Arnaud Costinot MIT Andrés Rodríguez-Clare UC Berkeley Iván Werning MIT May 2016 Abstract The empirical observation dc. The Quarterly Journal of Economics, 1986, vol. Inequality, Redistribution and Optimal Trade Policy: A Public Finance Approach∗ Roozbeh Hosseini University of Georgia Federal Reserve Bank of Atlanta roozbeh@uga. We also discuss how optimal trade policy is shaped by the presence of multiple sectors, intermediate goods, and We show that the optimal trade‐in and resale policies are of a threshold‐type and trade‐in‐for‐upgrade should be offered with a premium refund (compared to trade‐in‐for‐cash) only Under these conditions, optimal trade policy generally falls short of achieving a first-best outcome, except in cases with sectoral invariant scale elasticities. ownershipshareoftop3owners 23% OECD Optimal Trade‐in Return Policies: Is it Wise to be Generous? Article. 101, issue 2, 383-406 . Optimal Trade Policies and Labor Markets. economy shows that welfare gains from optimal policy are largely due to static terms-of-trade effects, implying that gains from time-varying tariffs or Yet, it has had surprisingly little impact on how economists think about trade policy. Grossman. Discussion Papers. PPO-clip updates policies via k+1 = argmax E s;a˘ˇ k [L(s;a; k; )] (1) where ˇis the policy, is the policy parameter Request PDF | On Jan 1, 2020, Mostafa Beshkar and others published Optimal Trade Policy in Global Production Networks | Find, read and cite all the research you need on ResearchGate Cao and Choi (2022) analyze the optimal return policy under the trade-in program. In this paper, we characterize optimal trade policy in a general-ized version of the trade model with monopolistic competition and firm-level hetero-geneity developed byMelitz(2003). Another perspective on this result is that the potential to manipulate the terms of trade hinges on the trade elasticity, whereas the degree of resource misallocation is influenced by Yet, it has had surprisingly little impact on how economists think about trade policy. Keywords: trade policy; monopolistic competition; heterogeneous firms; terms of trade; variety; productivity. This paper differs from Dutt et al. BS study the optimal trade policy in a dynamic Ricardian economy with two countries – Home and Foreign – where inelastically supplied labor is the only factor of production. When all output is We study optimal dynamic trade policies in an Eaton-Kortum model with technology diffusion through trade. Arnaud Costinot, Dave Donaldson, Jonathan Vogel & Ivan Werning. The a labor-abundant country). II. Wen-Jung Liang, Wen-Jung Liang. We study optimal dynamic trade policies in an Eaton-Kortum model with technology diffusion through trade. When all output is exported, optimal policy with a single home firm depends on the difference between foreign firms' actual responses to the home firm's actions We also discuss how optimal trade policy is shaped by the presence of multiple sectors, intermediate goods, and supply-chain linkages. contributor. trade policy around the time of the Smoot-Hawley tariff of 1930, a period when policy was unconstrained by trade agreements. The model predictions are supported by patterns of tariffs in WTO member countries. Under this policy, the total trading shares are divided equally over the trading horizon, so that the same number of shares are traded at each time step. In the extended models, we find that, the firm is more likely to prefer PTR to FTR under the online–offline dual‐channel retailing mode, but tends to prefer FTR to PTR when there is a competitive secondhand market, and should make the same optimal trade‐in return policy when there are two selling periods. It is optimal trade policy in a world economy comprising two coun-tries: the United States and the Rest of the World. "Optimal trade policy with monopolistic competition and heterogeneous firms," CEPR Discussion Papers 10219, C. The process of innovation and diffusion is one in which new ideas are combined Comparative Advantage and Optimal Trade Policy. 2 (February ship between comparative advantage and optimal trade policy. For example, should import sectors with weaker comparative advantage be protected more? Dave Donaldson, Jonathan Vogel, and Iván Werning. For this The possibility of time variation in trade policy is also important in understanding the potential relationship between the state of the economy and optimal trade policy. e. Sector-specific tariffs are summarized by a matrix of partial supply elasticities and the share of Home’s import in foreign incomes, reflecting Home’s import market power. (2010), Nordhaus(2015),Böhringer et al. Trade affects technology by determining the distribution from which potential To answer these questions, we characterize optimal trade policy under a dynamic trade model in which trade imbalances are generated en-dogenously. Trade affects technology by determining the distribution from which producers draw their insights. This is particularly so in order to understand the pattern of optimal trade taxes over the business cycle and the potential relationship between the growth rate of the economy (production tax, e) and optimal trade policy (import/export tax, t), and the government ’ s optimal choices ( e ∗ and t ∗ ) can be derived by di ff erentiating Equations (1) and (2) with This paper derives optimal trade and domestic taxes for a small open economy containing a monopolistically competitive (MC) sector in which firms may have heterogeneous productivity levels. Alternatively, some firms have a partial-trade-in-return (PTR) policy under which trade-in consumers who return a newly purchased product only receive a refund for the amount of money they paid (without including the trade-in-rebate). g. Rodrı́guez-Clare. optimal trade policy and the equilibrium levels of deficit and surplus. In this study, we build stylized analytical models to explore the optimal choice of a trade-in-return policy. “Comparative Advantage and Optimal Trade Policy. Wang, and Zhu (2024) characterize optimal trade and industrial policies, in the U. Quantity: Required Optimal Trade Policy and Production Location Ayako OBASHI* Toyo University September 2016 Abstract: This paper studies the role of trade policies in a theoretical framework considering the firm’s global production operation subject to trade costs. Under this stage, the domestic government maximizes its welfare to determine the optimal export subsidy. Within this framework we allow for wage, import and export subsidies/taxes. 2 The Basic Model and the Planner’s Problem II. 6 We calibrate the model to 20 countries, including the nineteen largest countries, based on their GDP in 2016, and the rest of the world. "Optimal Trade Policy With Monopolistic Competition and Heterogeneous Firms," Economics Series Working Papers 782, University of Oxford, Department of Economics. Motivated by the threat of job losses and welfare losses due to international trade, I characterize the condition in which it is optimal to use trade policies to protect domestic workers. This paper demonstrates that voluntary export restraints may be socially desirable to upgrade the quality of export products. date. We begin by analyzing the problem of a country-planner acting unilaterally to maximize domestic welfare, without This paper examines the political economy of U. 49. R. Finally, as is common with most calibrated trade models, the extent of welfare gains from optimal policies, particularly optimal trade policies alone, remains quite limited. Starting with unilateral policy, the optimal tari deviates from the standard \inverse This paper examines strategic trade policy for differentiated network-goods oligopolies under alternative scenarios when there is export-rivalry between two countries. At the micro-level, we find that optimal import taxes discriminate against the most profitable foreign exporters, while optimal export The optimal subsidy is the difference between the private and social marginal benefit of production/consumption. In this paper, we characterize optimal trade policy in a generalized version of the trade model with monopolistic competition and firm-level heterogeneity developed by Melitz (2003). When all output is exported, optimal policy with a single home firm depends on the difference between foreign firms' actual responses to the home firm's Our theory indicates that, absent diseconomies of scale, the optimal trade policy consists of (i) uniform or zero import taxes and (ii) non-zero export taxes that are decreasing in the industry-level trade elasticity and level of upstreamness. Our theory shows that optimal Trade wars can have large macroeconomic consequences, but there is limited focus on the interaction between optimal trade and macroeconomic policies. This study considers a differentiated duopoly, including domestic and foreign enterprises, in trade, analyzes the impacts of product differentiation and productivity variance on equilibrium results, and explores the optimal trade policy in different competition modes. Perhaps surprisingly, AB - We analyze the welfare effects of trade and industrial policy under oligopoly, and characterize optimal intervention under a variety of assumptions about market structure and conduct. File name: nber. The study of optimal trade policy in non-cooperative environments has a long history in the literature on international trade. We study how income taxes and trade policies should be Section 3 analyzes optimal trade policy in a network goods oligopoly with no managerial delegation, taking price and quantity competition into account separately. S. in perspective, the average gains from optimal trade policy that we estimate in the same environment are equal to 0. "Geography, Competition, and Optimal Multilateral Trade Policy," Development Working Papers 446, Centro Studi Luca d'Agliano, University of Milano. Our main result can be stated as follows. This paper examines the political economy of U. In Section 4, we examine the impact of relative-performance-based managerial delegation in firms and its interaction with the strength of network externalities on optimal trade policy ficacy of trade policy at tackling environmental emission (e. The Home country’s government has three instruments at its disposal: import and export taxes – potentially different across different goods – and capital controls Standard ToT considerations pin down the optimal level of trade policy. (2016)). We demonstrate that, in the absence of managerial delegation, the optimal trade policy entails an export tax (subsidy) if network externalities are weak (strong). ownershipshareoftopowner 86. There are three such margins in this model. Finally, if the number of di erentiated varieties is ine ciently low, the optimal non-cooperative trade policy is given by a positive import tari (export subsidy). 1 Introduction In quantitative finance area, optimal trade execution (OTE), also called optimal liquidation, is a critical issue in many investment activities [7,16,19,24]. JEL-codes: F1 F10 F11 F12 F13 F14 F15 F16 F19 (search for similar items in EconPapers) Date: 2021-07 New Economics Papers: this item is included The trade war highlights that, how to formulate the optimal trade policy is crucial to maxi- mize social welfare. The process of innovation and diffusion is one in which new ideas are Backed by our global quantitative trading fund, OTS Research and leading hedge fund, OTS Capital, trading with Optimal Traders means trading with unparalleled financial backing. 1 Recent research in the international trade eld has led to an explosion of new empirical methods that can be used to study the aggregate and distributional consequences of many types of changes to ing optimal trade policy and show that our main insights are robust. 4% SBO Private Outofthese: Avg. Under very general conditions, we show that from the point of view of a country that unilaterally imposes trade taxes to maximize domestic welfare, the self-selection of heterogeneous firms into exports calls for import subsidies on the least profitable We propose a deep learning framework, DL-opt, designed to efficiently solve for optimal policies in quantifiable general equilibrium trade models. 2% SBO Public Avg. tariffs and export taxes matter. Save. Analysis encompasses cases in which the domestic MC sector is able to expand or contract flexibly, or is constrained to be of fixed size. Under very general conditions, we show that from the point of view of a country that unilaterally imposes trade taxes to maximize domestic welfare, the self-selection of heterogeneous firms into exports calls for import subsidies on the least profitable Optimal trade and capital control policies are characterized under a dynamic model with endogenous trade imbalances. Optimal trade taxes should be uniform across imported goods and weakly monotone with respect to comparative advantage across exported goods. ,Babiker(2005),Elliott et al. Eaton, Jonathan and Gene M. JEL classification numbers: F11, F13, F16, F66, J64 We propose a deep learning framework, DL-opt, designed to efficiently solve for optimal policies in quantifiable general equilibrium trade models. Each firm produces a single product that may be a perfect or imperfect sub- We compute the optimal trade policies for both the steady state and the transition to the steady state. 1 Preliminaries PPO is an on-policy algorithm and applies to both discrete and continuous action spaces. Trade Policy Under Firm-Level Heterogeneity in a Small Economy. The results suggest that (a) a country that has an inefficient level of unemployment may experience welfare losses from free trade; (b) having search‐generated unemployment is not sufficient to justify a use of trade policy, because free trade is still optimal when the labor market is constrained‐efficient; and (c) a small country that has Optimal Trade Policy with International Technology Diffusion with Yan Bai, Dan Lu and Hanxi Wang working paper, FEBRUARY 2024 Technological Rivalry and Optimal Dynamic Policy in an Open Economy with Yan Bai and Dan Lu working paper NBER 1703, REVISE AND RESUBMIT, JOURNAL OF POLITICAL ECONOMY- MACROECONOMICS March 2024. 00 for this paper. Our paper is related to the literature on optimal trade policies. P. JEL-codes: F1 F10 F11 F12 F13 F14 F15 F16 F19 (search for similar items in EconPapers) Date: 2021-07 New Economics Papers: this item is included . Trade thus affects technology by determining the distribution from We mainly consider three scenarios: first, unilaterally optimal trade policy without any restrictions; second, optimal capital controls assuming free trade obligations under WTO; We study optimal dynamic trade policies in an Eaton–Kortum model with technology diffusion through trade. Yet we know little about its implications for how nations We provide a general formula for optimal unilateral policies in multi-sector, general-equilibrium Ricardian models with various widely adopted labor market specifications. Free trade is optimal only when a labor market is initially efficient. OPTIMAL TRADE POLICY AND THE ROLE OF CONJECTURAL VARIATIONS: THE CASE OF DUOPOLY In this and subsequent sections we characterize optimal gov-ernment policy in the presence of oligopolistic competition among domestic and foreign firms in international markets. P. As the concerns of trade policies arise in practice recently, the purpose of this Downloadable (with restrictions)! We provide a general formula for optimal unilateral policies in multi-sector, general-equilibrium Ricardian models with various widely adopted labor market specifications. (2009) in that I consider the efficiency of the labor search equilibrium and characterize the optimal trade policy. Grossman, Also, unlike results regarding strategic trade policy with asymmetric costs, optimal policy for a government when technology licensing is possible is neither necessarily (a) higher in absolute tion. Recent evidence, as illustrated by Autor et al We analyze the welfare effects of trade and industrial policy under oligopoly, and characterize optimal intervention under a variety of assumptions about market structure and conduct. Trade thus affects technology by determining the distribution from which producers draw their insights. In this study we find that under Cournot competition it is optimal for the home government to offer a menu of policies which search of the optimal emission trading and technology investment decisions for a make-to-order company faced with a stochastic demand under emission trading policy. S. Our theory shows that optimal policies capture dynamic motives for a country to alter global technology. It is defined as how to sell a certain number of shares of a given stock within a fixed time while maximizing the revenue, or how to buy a certain number of shares within a fixed time so that the trade cost is minimized. AU - Haaland, Jan I. Perhaps surprisingly, ing optimal trade policy and show that our main insights are robust. (TWAP) policy. andEurope Firmtype Statistic Value Source UnitedStates Private Shareoffirmswith<4owners 97. The process of innovation and diffusion is one in which new ideas are combined with insights from others. In addition, the targeting of instruments to distortions evident in Dixit’s results seems to carry through. For example, optimal trade policies in recent general equilibrium trade models are theoretically In quantitative finance area, optimal trade execution (OTE), also called optimal liquidation, is a critical issue in many investment activities [7, 16, 19, 24]. It is the first work in the field to examine trade policy in an integrated theoreti-cal framework based on optimizing dynamic models that pay careful with a large body of trade policy analyses that abstract from distributive issues (Bagwell and Staiger, 2016). Trade affects technology by determining the distribution from which potential producers draw their insights. In our numerical examples, we find gains from trade under optimal trade taxes that are 24% larger than those obtained under laissez-faire for the agricultural case and 32% larger for the man-ufacturing case. We consider a model of politically-optimal trade policy for a large country that can influence its terms of trade and where workers and firms lobby for protection. Lashkaripour and Lugovskyy (2023) and Bartelme et al. The market supply and demand get adjusted over time until the post-policy equilibrium arrives. As the concerns of trade policies arise in practice recently, the purpose of this a firm implement a trade-in return policy? How can the optimal product price and trade-in rebate be determined? (3) Which strategy is more beneficial for consumers? To address these questions, this paper considers a monopolistic firm that offers a trade-in program and can choose to implement a trade-in return policy for trade-in consumers. 2 There is, however, scant evidence on how to design optimal trade policies in managerial exporting firms operating in a horizontally differentiated network goods oligopoly, which is a widespread phenomenon as documented below. optimal trade policy in two sectors: agriculture and manufacturing. We use a competitive trade model with input-output linkages where trade affects relative wages and the reallocation of workers across various sectors is frictional. The –rst is the literature on optimal trade policy under imperfect competition (Grossman and Helpman, 1989; Grossman, 1992). Qiu, Optimal strategic trade policy 335 Cournot competition in order to reduce the foreign firm's production, or the low-cost firm signalling a high cost under Bertrand competition to raise the foreign firm's price. At the micro-level, we find that optimal import taxes discriminate against the most profitable foreign exporters, while optimal export taxes are uniform across Submit & Leave (SL) policy (as baseline), the Q-learning algorithm, and the latest hybrid method that combines the Almgren-Chriss model and reinforcement learning. author: Costinot, Arnaud: dc. 54 (Week 14) rationale for trade policy is to shift profits from foreign to domestic firms To investigate that idea formally, consider the following game: 1 2. Bilateral trade costs are In the realm of strategic trade policy, Ghosh and Saha (2008) explore the impact of subsidies on licensing decisions and payments in a quantity competition setting with asymmetric costs, showing that optimal policy can sometimes be an export tax rather than a subsidy. But if export taxes are restricted, it is optimal to raise import taxes as a second-best policy to Trade Policy in Developing Countries Trade Policy in Developing Countries is an analysis aimed at academics, graduate students,and professional,policy-oriented economists. KRISHNA and others published THE NON-OPTIMALITY OF OPTIMAL TRADE POLICIES: THE U. 1 If domestic firm d do not have foreign local firm 1’s corporate control rights We now proceed to discuss the optimal trade policy of domestic country. Hence, we may conclude that a purely self-oriented policy of optimal monetary design and delegation can achieve major welfare gains in an environment of endogenous non-cooperative trade policy and monopoly distortions in production. Thus the use of an optimal tariff, export tax, import quota, or voluntary export restraint (VER) is a “beggar-thy-neighbor” policy—one country benefits only by harming others. We assume that labor is the only factor production, that all cost functions 13 The Nonoptimality of Optimal Trade Policies other sources. Inthefirstexercise,allgoodsareassumed to be agricultural goods, whereas in the second, all goods are as- the design of optimal trade policy when heterogeneous firms select into exporting. accessioned: 2022-02-18T19 This paper examines the political economy of U. Venables 12th November 2014 Abstract This paper derives optimal trade and domestic taxes for a small open economy containing a monopolistically competitive (MC) sector in which firms may have heterogeneous productivity levels. The trade war highlights that, how to formulate the optimal trade policy is crucial to maxi- mize social welfare. For example, our main prediction—that optimal trade taxes are uniform across imported goods and weakly monotone with respect to comparative advantage across goods—holds without further qualification in a Ricardian model with uniform iceberg trade costs. Inthefirstexercise,allgoodsareassumed to be agricultural goods, whereas in the second, all goods are as- "Geography, Competition, and Optimal Multilateral Trade Policy," Development Working Papers 446, Centro Studi Luca d'Agliano, University of Milano. 1 Examples of optimal trade taxes include (i) a zero import tar- A First Look at Unilaterally Optimal Tari s 14. edu Ali Shourideh Carnegie Mellon University ashourid@andrew. Our baseline environment is a canonical model of intra-industry trade with monopo-listic competition and firm-level heterogeneity. Tap into our powerful connections, maximise profits, and leverage shared learning. We consider twoseparateexercises. ing optimal trade policy and show that our main insights are robust. A trade war would reduce global welfare, and may leave all countries worse off than under a cooperative trading system. After a comprehensive analysis of the proposed model, we find that an optimal emission permit level, which increases in carbon penalty and decreases in carbon price, exists in each ship between comparative advantage and optimal trade policy. The computational study also reveals that the number of warehouses opened decreases with the increase of financing costs. A weak form of the optimal tariff, requiring that an import Expand. The aim of this paper is to study optimal trade policy in the canonical two-sector Krugman (1980) model, where one sector is characterized by monopolistic competition, increasing returns and iceberg trade costs, while the other features perfect competition and constant returns. Antonella Nocco & Gianmarco I. Each firm produces a single product that may be a perfect or imperfect sub- T1 - Optimal trade policy with monopolistic competition and heterogeneous firms. Brander and Spencer This paper examines the political economy of U. The main building blocks are taken from Melitz(2003). good framework with political economy motives to study optimal bilateral trade policy. We derive explicit formulae for optimal and constrained optimal taxes on domestic sales, imports, and exports, both when the monopolistically competitive (MC) sector contains Wang, and Zhu (2024) characterize optimal trade and industrial policies, in the U. They compare a full-trade-in-return policy that includes the trade-in rebate and a partial-trade-in-return policy We also discuss how optimal trade policy is shaped by the presence of multiple sectors, intermediate goods, and supply-chain linkages. Jonathan Eaton and Gene M. This column studies the optimal design of trade policies under different monetary policy rules. Yan Bai, Keyu Jin, Dan Lu and Hanxi Wang. PY - 2016/9. New ideas are combined with insights from others. Working Paper 19689 DOI 10. Finally, in Section 6, we conclude by discussing some of the potential implications of our analysis as well as further questions for future research. We assume that labor is the only factor production, that all cost functions In comparison to static trade policy analyses, the problem of optimal policy under a dynamic setting has at least two novel features. and China, that are uniform across certain industries. We close the chapter by discussing the scope of future research. The social welfare of domestic 491 Yen-Ju Lin / Procedia 1 Introduction Trade policy analysis has been a central focus of research since at least the pioneering optimal tari analysis inBickerdike(1907). This is a National Bureau of Economic Research Paper. First, trade policy could fluctuate over time, which creates the possibility for tariffs to affect saving and investment decisions in expectation of future changes in trade policy. Optimal trade execution seeks to minimize trading costs when selling or buying a set number of stock shares over a certain time horizon within the trading day. Venables, Anthony & Haaland, Jan I. The production location potentially depends on a combination of trade costs, inclusive of trade In this paper, we explore the relationship between optimal trade and redistributive policies when the gains from trade are unequally distributed. E. Demidova A. Trade policy analysis has been a central focus of research since at least the pioneering optimal tariff analysis in Bickerdike (1907). Perhaps surprisingly, We then apply our DL-opt framework to solve optimal trade and industrial policies in a multi-country-multi-sector general equilibrium trade model with input-output linkages and sectoral scale economies, `a la the models of Lashkaripour and Lugovskyy(2023),Bartelme et al. We study optimal dynamic trade policies in an Eaton–Kortum model with technology diffusion through trade. We use our framework characterizes the key determinants of optimal tariffs: comparative advantage, sectoral productivities, as well as the elasticity of sectoral choice in each country. DL-opt integrates (i) a nested fixed point (NFXP) formulation of the optimization problem, (ii) automatic implicit differentiation to enhance gradient descent for solving unilateral optimal policies We also discuss how optimal trade policy is shaped by the presence of multiple sectors, intermediate goods, and supply-chain linkages. (2021), and Downloadable (with restrictions)! We study optimal dynamic trade policies in an Eaton-Kortum model with technology diffusion through trade. 1 Recent research in the international trade field has led to an explosion of new empirical methods that can be used to study the aggregate and distributional consequences of many types of changes to the economic environment (e. 95% of GDP. cmu. As pointed out by Caliendo and Parro(2021), characterizing optimal trade policy in current trade modes is challenging, but the literature has introduced new methods and new insights. Optimal trade credit and replenishment policies for supply chain network design optimizing trade credit policy can help achieve significant cost savings compared to the traditional network design model. η ∈ [0 , ∞ ) , μ ∈ [0, 1]). author: Werning, Iván: dc. We show that optimal policies capture a dynamic motive for a country to alter global us understand the implications of imperfect competition on optimal trade policy in a variety of scenarios. "Geography, competition and optimal multilateral trade policy," CEP Discussion Papers dp1610, Centre for Economic Performance, LSE. D. When informational externalities in the recognition of quality result in suboptimal production of quality by competitive firms and the enforcement of socially desirable quality is very costly, optimal trade policy calls for export restrictions. These policies take into The aim of this paper is to study optimal trade policy in a version of the Krugman (1980) model of intra-industry trade due to monopolistic competition and increasing returns. In general, policies work through both a terms-of-trade and a variety effect, and the paper shows how the relative importance of each depends on the structure of the economy. Economic Environment Consider a world economy with 2 countries, c = 1,2 There are two goods, i = 1,2, both produced under perfect competition good 2 is Optimal Trade Policy with International Technology Diffusion. These restrictions apply We also discuss how optimal trade policy is shaped by the presence of multiple sectors, intermediate goods, and supply-chain linkages. For example, should import sectors with weaker comparative advantage be protected more? Conversely, should export sectors with stronger comparative advantage be subsidized less? In this paper we explore Finally, we present recent theoretical insights on optimal unilateral trade policy with firm and product heterogeneity in the context of large and small open economies with perfectly and imperfectly competitive product markets. 7 Our analysis contributes to three main literatures. DL-opt integrates (i) a nested fixed point (NFXP) formulation of the optimization problem, (ii) automatic implicit differentiation to enhance gradient descent for solving unilateral optimal policies, and (iii) a best-response "Geography, competition and optimal multilateral trade policy," CEP Discussion Papers dp1610, Centre for Economic Performance, LSE. Each firm produces a single product that may be a perfect or imperfect sub- mixed oligopoly has not considered the role of strategic trade policies and has not analyzed the interaction between privatization and strategic trade policy. These policies take into account selection effects, country endowments, and other the design of optimal trade policy when heterogeneous firms select into exporting. 14. To this end, we characterize optimal trade and industrial policies in an important class of quantitative trade models with scale effects and profits, estimating the structural parameters that govern policy outcomes. , The final part of the analysis then investigates optimal trade policy for a small open economy in the competitive equilibrium. cicwdxxaxtbzxfckqvsbsxksmfqkqyvpxxemsflnlin