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Hokkaido University Collection of Scholarly and Academic Papers >
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Trade Policy with Intermediate Inputs Trade
| Title: | Trade Policy with Intermediate Inputs Trade |
| Authors: | Qasim, Ahmed Waqar Browse this author | | Itaya, Jun-ichi Browse this author →KAKEN DB |
| Keywords: | intermediate inputs | | heterogeneous firms | | trade policy | | lobbying firms |
| Issue Date: | Oct-2019 |
| Publisher: | Faculty of Economics and Business, Hokkaido University |
| Journal Title: | Discussion Paper, Series A |
| Volume: | 342 |
| Abstract: | The paper aims to characterize the tariff policy for final goods as well as for intermediate inputs
in the model of heterogeneous firms. We developed a theoretical model to show how the tariff on
final goods and intermediate inputs affect the welfare, productivity, and the entry of firms in a
country. We formulate the tariff level selection choice available to the policymaker with respect to
four policy experiments. These policy experiments include; unilateral tariff selection, cooperative
tariff selection, non-cooperative tariff selection, and political tariff selection. Our results show
that at the Stackelberg equilibrium, which results from the unilateral tariff selection, the policy
level selected by the leader is higher compared to the rest of the experiments. While, in the case of
cooperation, free trade will be the equilibrium outcome. Since, the welfare gains of one country
come at the cost of others, therefore, zero tariffs are the optimal strategy for both countries. At
Nash equilibrium, which results of non-cooperative tariff policy selection, both countries select
policy level simultaneously and applied positive tariff rates for both intermediate inputs and final
goods. Lastly, at political equilibrium, which results after considering lobby by the heterogeneous
firms, the policy level selection diverges from benchmark unilateral level. To illustrate our tariff
policy formulations quantitively, we use the US import data to estimate the policy levels. These
estimates are then compared the factual tariff rates to evaluate the degree of political interference
of lobbying firms in the policy level selection. |
| Type: | bulletin (article) |
| URI: | http://hdl.handle.net/2115/76156 |
| Appears in Collections: | Discussion paper > Series A
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