The Loss from Trade under International Cournot Oligopoly with Cost Asymmetry
This paper examines the efficiency and welfare effects of intra-industry trade in the presence of imperfect competition and heterogeneous technologies. We show that when a Southern country has a relatively less concentrated industry and faces low demand, the output of the Northern country may contract after initiating trade. Production inefficiencies can outweigh the gain effected by trade-induced competition and lower price in trade, resulting in a net loss in the global welfare. In some circumstances, voluntary technology transfer, managed trade through VERs, or the introduction of a tariff can improve both trading partners' welfare. Copyright © 2010 Blackwell Publishing Ltd.
Year of publication: |
2010
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Authors: | Dong, Baomin ; Yuan, Lasheng |
Published in: |
Review of International Economics. - Wiley Blackwell, ISSN 0965-7576. - Vol. 18.2010, 5, p. 818-831
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Publisher: |
Wiley Blackwell |
Saved in:
freely available
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