Whether to Choose Tariffs or Subsidies to Protect a Domestic Industry
Whether to Choose Tariffs or Subsidies to Protect a Domestic Industry

세종대학교 경제통합연구소
Journal of Economic Integration
제18권 제1호
2003.03

150 - 163 (14 pages)

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The use of tariffs in the absence of subsidies in small countries is an empirical observation which stands in sharp contrast to the theoretical literature of trade policy. We analyze the welfare effects of tariffs and subsidies in a homogeneous good duopoly game with cost asymmetries between the two firms, allowing for distortionary taxation. We find that for reasonable values of the distortion parameter or for a large cost disadvantage of the home firm, a tariff is the optimal policy tool.

Ⅰ. Introduction

Ⅱ. The Model

Ⅲ. Import Tariff

Ⅳ. Home Firm Subsidy

Ⅴ. Comparison of Trade Policy Instruments

Ⅵ. Concluding Remarks

Whether to Choose Tariffs or Subsidies to Protect a Domestic Industry
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Whether to Choose Tariffs or Subsidies to Protect a Domestic Industry
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