Fung: Department of Economics, University of California, Santa Cruz, CA 95064, USA. Tel: 831-459-3273; Fax: 831-459-5077; E-mail: firstname.lastname@example.org. Lin (corresponding author): Department of Economics, National Dong Hwa University, Shou-Feng, Hualien, 974, Taiwan. Tel: +886-3-863-5540; Fax: +886-3-863-5530; E-mail: email@example.com. Chang: Department of Economics, Chinese Culture University, Taipei, 111, Taiwan. Tel: +886-2-2861-0511 ext. 29334; Fax: +886-2-2862-5229; E-mail: firstname.lastname@example.org.
The Political Economy of Strategic Trade Policies*
Version of Record online: 21 MAY 2009
© 2009 The Authors. Journal compilation © 2009 Blackwell Publishing Ltd
Review of International Economics
Volume 17, Issue 3, pages 494–509, August 2009
How to Cite
Fung, K. C., Lin, C. C. and Chang, R.-Y. (2009), The Political Economy of Strategic Trade Policies. Review of International Economics, 17: 494–509. doi: 10.1111/j.1467-9396.2009.00815.x
- Issue online: 13 JUL 2009
- Version of Record online: 21 MAY 2009
This paper applies Grossman and Helpman's (1994) common agency model to investigate the formation of strategic export subsidy and strategic import tariff under both Cournot competition and Bertrand competition. The results of this paper indicate that even with political pressure, the Grossman–Helpman politically-determined export policy is identical to the rent-shifting export policy, which is export subsidy (export tax) in Cournot (Bertrand) competition. The politically-determined import tariff will be higher than the optimal level. This paper highlights the possibility that lobbying can restore the level of trade intervention to a more efficient one in the absence of the benevolent dictator.