Trade liberalization, division of labor and welfare under oligopoly

Incorporating explicitly division of labor into a two-country general oligopolistic equilibrium model, we examine the effects of trade liberalization on firm productivity and welfare. We show that a tariff reduction increases the firm productivity of the trading industries but decreases that of the...

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Bibliographic Details
Published in:The journal of international trade & economic development 2018-01, Vol.27 (1), p.91-101
Main Authors: Fujiwara, Kenji, Kamei, Keita
Format: Article
Language:English
Subjects:
Ambiguity
Division of labor
Economic models
Equilibrium
firm productivity
General oligopolistic equilibrium
Oligopoly
Productivity
Tariffs
Trade liberalization
Trading
Welfare
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Summary:Incorporating explicitly division of labor into a two-country general oligopolistic equilibrium model, we examine the effects of trade liberalization on firm productivity and welfare. We show that a tariff reduction increases the firm productivity of the trading industries but decreases that of the non-trading industries. An expansion of the trading industries, in contrast, decreases the firm productivity of both the trading and non-trading industries. We then find that a tariff reduction necessarily reduces welfare while the welfare effect of expansion of trading industries is ambiguous.
ISSN:0963-8199
1469-9559
DOI:10.1080/09638199.2017.1339362