Robust rules for industrial policy in open economies
The theory of strategic trade policy yields ambiguous recommendations for assistance to exporting firms in oligopolistic industries. However, some writers have suggested that investment subsidies are a more robust recommendation than export subsidies. We show that, although ambiguous in principle, t...
| Main Authors: | , |
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| Format: | Journal article |
| Language: | English |
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Routledge
2001
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| Subjects: |
| _version_ | 1826307261164683264 |
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| author | Leahy, D Neary, J |
| author_facet | Leahy, D Neary, J |
| author_sort | Leahy, D |
| collection | OXFORD |
| description | The theory of strategic trade policy yields ambiguous recommendations for assistance to exporting firms in oligopolistic industries. However, some writers have suggested that investment subsidies are a more robust recommendation than export subsidies. We show that, although ambiguous in principle, the case for investment subsidies is reasonably robust in practice. Except when functional forms exhibit arbitrary nonlinearities, it holds under both Cournot and Bertrand competition, with either cost-reducing or market-expanding investment, and with or without spillovers. Only if firms have strong asymmetries in their investment behaviour and engage in Bertrand competition is an investment tax clearly justified. |
| first_indexed | 2024-03-07T07:00:15Z |
| format | Journal article |
| id | oxford-uuid:ff7e9761-bdc3-4b52-87e7-1919480c4a30 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T07:00:15Z |
| publishDate | 2001 |
| publisher | Routledge |
| record_format | dspace |
| spelling | oxford-uuid:ff7e9761-bdc3-4b52-87e7-1919480c4a302022-03-27T13:45:22ZRobust rules for industrial policy in open economiesJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:ff7e9761-bdc3-4b52-87e7-1919480c4a30EconomicsEnglishOxford University Research Archive - ValetRoutledge2001Leahy, DNeary, JThe theory of strategic trade policy yields ambiguous recommendations for assistance to exporting firms in oligopolistic industries. However, some writers have suggested that investment subsidies are a more robust recommendation than export subsidies. We show that, although ambiguous in principle, the case for investment subsidies is reasonably robust in practice. Except when functional forms exhibit arbitrary nonlinearities, it holds under both Cournot and Bertrand competition, with either cost-reducing or market-expanding investment, and with or without spillovers. Only if firms have strong asymmetries in their investment behaviour and engage in Bertrand competition is an investment tax clearly justified. |
| spellingShingle | Economics Leahy, D Neary, J Robust rules for industrial policy in open economies |
| title | Robust rules for industrial policy in open economies |
| title_full | Robust rules for industrial policy in open economies |
| title_fullStr | Robust rules for industrial policy in open economies |
| title_full_unstemmed | Robust rules for industrial policy in open economies |
| title_short | Robust rules for industrial policy in open economies |
| title_sort | robust rules for industrial policy in open economies |
| topic | Economics |
| work_keys_str_mv | AT leahyd robustrulesforindustrialpolicyinopeneconomies AT nearyj robustrulesforindustrialpolicyinopeneconomies |