This paper presents a two-country two-industry monetary model, with intermediate inputs and transport costs, which … builds a bridge between the New Open Economy Macroeconomics and the New Economic Geography literatures. Endogenously …

. The introduction of incomplete information about costs adds an incentive for both governments to use their trade policy as … a signal of their firm’s costs. This signalling effect increases the export subsidy and decreases the import tariff. In …

In a model of vertical product differentiation, duopolistic firms face qualitydependent costs and compete in quality … identical costs, both industries remain in the market under either regulatory alternative. Mutual Recognition is the optimal … policy choice for either region. With signifi - cantly different costs, the Full-Harmonization outcome includes only one firm …

with the location effects deriving from trade costs, increasing returns to scale, product dif ferentiation, and … depends negatively on the magnitude of the trade costs. Hence, the model accommodates high levels of intra-industry trade …

condition, relating the degree of substi - tutability in demand between the two goods and transport cost, in order for each …