The structure of Nash equilibrium tariffs

Ogawa, Yoshitomo

doi:10.1007/s00199-010-0599-x

Cited by 5 publications

(3 citation statements)

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“…The welfare effect of manipulating the terms of trade by means of a tariff is typically analysed in the literature on optimal tariffs (see, for example, Kaldor, ; Graaff, –50; Johnson, –52; Kemp, ; Kennan & Riezman, ; Bond, ; Lahiri & Ono, ; Syropoulos, b; Ogawa, ). Furthermore, Bhagwati and Ramaswami () and Bhagwati et al .…”

Section: Introductionmentioning

confidence: 99%

“…The welfare effect of manipulating the terms of trade by means of a tariff is typically analysed in the literature on optimal tariffs (see, for example, Kaldor, 1940;Graaff, 1949-50;Johnson, 1951-52;Kemp, 1967;Kennan & Riezman, 1988;Bond, 1990;Lahiri & Ono, 19891999Syropoulos, 2002a b;Ogawa, 2007Ogawa, 2012. Furthermore, Bhagwati and Ramaswami (1963) and Bhagwati et al (1969) assumed some domestic distortions and pointed out the possibility that commodity and production taxes-cum-subsidies increase welfare.…”

Section: Introductionmentioning

confidence: 99%

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Partial Replacement of Protective Tariffs by Production Subsidies and Welfare

Ogawa

Ono

2015

Economic Record

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Using a two‐country framework, this paper examines the welfare effect of partially replacing a tariff with a production subsidy. It considers some plausible situations for industry protection, including where the initial tariff is higher than the optimal tariff, where a certain output of the protected commodity must be maintained, and where domestic production of the sector yields some externalities. In these cases it is shown that the partial replacement benefits the country. Properties of the optimal replacement are also explored.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Partial Replacement of Protective Tariffs by Production Subsidies and Welfare

Ogawa

Ono

2015

Economic Record

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“… Many research papers have shown that the existence of protectionism such as tariffs, quota, and environmental regulations is the state of Nash equilibrium because countries try to improve the terms of trade through protectionism. For Nash tariff wars, see Johnson (), Gorman (), Kennan and Riezman (), Gros (), Syropoulos (), Zissimos (), and Ogawa (). For Nash quota wars, see Rodriguez () and Tower ().…”

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confidence: 99%

Comparative advantage and strategic specialization

Kang

2017

Rev International Economics

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This paper shows that a strong comparative advantage is necessary for free trade and specialization in a 2 3 2 symmetric Ricardian model to be achieved in a Nash equilibrium. Governments strategically control labor distribution across industries, and representative agents maximize CobbDouglas utilities. A Nash equilibrium with complete specialization is achieved if and only if relative productivity exceeds a key value of 3, which is considered a very large number based on previous empirical studies. This paper also introduces a two-stage game where each government chooses labor distribution first and then tariffs. In this two-stage game, complete specialization is never achieved for any relative productivity level. Finally, by generalizing the Cobb-Douglas model into constant elasticity of substitution (CES) preferences, I show that if immiserizing growth effects exist, complete specialization could not be achieved for any level of relative productivity. | IN TRO DUCT IO NThe two most important questions in international trade are the normative question of "why should nations pursue free trade?" and the positive question of "do nations have incentives to pursue free trade?" The former question is well explained by David Ricardo, in that comparative advantage is the source of mutual benefits from world trade. This paper indicates that the answer to the second question also relies on comparative advantage; a strong comparative advantage is necessary for nations to strategically pursue free trade in a Ricardian model. Defining the degree of comparative advantage as the relative productivity between more and less competitive industries in a symmetric Ricardian model with Cobb-Douglas preferences, this paper shows that a Nash equilibrium with complete specialization is achieved if and only if the measure exceeds a key value of 3, a very large number based on previous empirical studies. This paper also shows that complete specialization cannot be achieved if the government implements import tariffs in addition to labor distribution policies, or if there exist immiserizing growth effects.A rational government wants to manipulate the terms of trade by protecting the less competitive sector and controlling the more competitive one. However, protectionism under strong comparative advantage results in a decrease in the domestic production size and consequently a decrease in its welfare. Therefore, a strong mutual comparative advantage should be present in order to achieve free trade. Otherwise, the government would use trade policies such as export subsidies or import tariffs. Costinot, Donaldson, Vogel, and Werning (2015) et al. (2015) and this paper is that the former considered import tariff and export subsidy as their strategies with a passive foreign government whereas the latter considers governments' intervention in labor distribution in a Nash equilibrium. Even though this paper assumes that governments directly control the labor distribution across industries rather than using indirect tools such as tra...

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Optimal indirect tax design in an open economy

Ogawa

Hosoe

2020

Int Tax Public Finance

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The structure of Nash equilibrium tariffs

Cited by 5 publications

References 30 publications

Partial Replacement of Protective Tariffs by Production Subsidies and Welfare

Partial Replacement of Protective Tariffs by Production Subsidies and Welfare

Comparative advantage and strategic specialization

Optimal indirect tax design in an open economy

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