NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Targeted Export Promotion with Several Oligopolistic Industries

Avinash K. Dixit, Gene M. Grossman

NBER Working Paper No. 1344 (Also Reprint No. r0848)
Issued in April 1987
NBER Program(s):   ITI   IFM

In this paper we ask whether a policy of targeted export promotion can raise domestic welfare when several oligopolistic industries all draw on the same scarce factor of production. Our point of departure is one of Cournot duopoly in which a single home firm competes with a single foreign firm in a market outside the horse country. It has been shown previously that when there is only one such industry in an otherwise perfectly competitive world economy, a subsidy policy by the home government transfers profits to the domestic firm, and thereby raises domestic welfare. However,when many such industries (and only these) utilize the same inelastically supplied resource, promotion of one bids up the return to the specific factor, and consequently disadvantages all of the non-targeted industries in their respective duopolistic competitions. Our question then is which industry(s), if any, is worthy of promotion. We find that, when the specific factor is used in fixed proportion to output, and all of the duopolies have similar demand and cost conditions, a policy of free trade is optimal. We identify the conditions for welfare improvement when a single industry is selected for targeting under asymmetric conditions, and also investigate whether a uniform subsidy to all industries in the imperfectly competitive sector will raise domestic welfare.

download in pdf format
   (222 K)

email paper

This paper is available as PDF (222 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w1344

Published: Grossman, Gene M. adn Avinash K. Dixit. "Targeted Export Promotion with Several Oligopolistic Industries." Journal of International Economics, Vol. 2 1, (1986), pp. 233-249. citation courtesy of

Users who downloaded this paper also downloaded these:
Dixit and Grossman w0794 Trade and Protection with Multistage Production
Brander and Spencer w1464 Export Subsidies and International Market Share Rivalry
Brander w5020 Strategic Trade Policy
Eaton and Grossman w1236 Optimal Trade and Industrial Policy Under Oligopoly
Krugman Introduction to "Empirical Studies of Strategic Trade Policy"
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us