Competition, Productivity and Trade, Reconsidered

Author Name ARA Tomohiro (Fukushima University)
Creation Date/NO. April 2021 21-E-032
Research Project Economic Policy Issues in the Global Economy
Download / Links


We study unilateral trade liberalization and unilateral market expansion and their impact on optimal tariffs in a heterogeneous firm model with a general productivity distribution and an endogenous wage. We show that unilateral trade liberalization entails selection effects, but unilateral market expansion entails anti-selection effects in a country of origin. Conditional on the two sufficient statistics for welfare, the optimal level of import tariffs is the same across different trade models with a constant trade elasticity, but more generally the optimal level depends on the micro structure that makes the trade elasticity variable.