Optimal trade policy Trade thus affects technology by determining the distribution from We mainly consider three scenarios: first, unilaterally optimal trade policy without any restrictions; second, optimal capital controls assuming free trade obligations under WTO; We study optimal dynamic trade policies in an Eaton–Kortum model with technology diffusion through trade. For example, our main prediction—that optimal trade taxes are uniform across imported goods and weakly monotone with respect to comparative advantage across goods—holds without further qualification in a Ricardian model with uniform iceberg trade costs. Trade affects technology by determining the distribution from which potential Our theory shows that optimal policies capture a dynamic motive for a country to alter global technology. (2010), Nordhaus(2015),Böhringer et al. Our baseline environment is a canonical model of intra-industry trade with monopo- listic competition and Optimal trade and capital control policies are characterized under a dynamic model with endogenous trade imbalances. Initially, I study the optimal trade policy of a small open economy: abstracting from terms-of-trade externalities highlights the novel incentive for protectionism from the labor market. This paper, in contrast, computes the fully optimal Following this policy, Home’s technology and real consumption both decrease in the long run. Motivated by the threat of job losses and welfare losses due to international trade, I characterize the condition in which it is optimal to use trade policies to protect domestic workers. The goal of this paper is to fill this gap on the normative side of the literature and uncover the general principles that should guide the design of optimal trade policy when heterogeneous firms select into exporting. 1 Examples of optimal trade taxes include (i) a zero import tar- We then turn to the normative analysis of trade policy, and in Section 4, we discuss recent theoretical tools and results related to optimal unilateral trade policy. Optimal trade taxes should be uniform across imported goods and weakly monotone with respect to comparative advantage across exported goods. At the micro-level, we find that optimal import taxes discriminate against the most profitable foreign exporters, while optimal export taxes are uniform across domestic exporters. Optimal Trade Policy with International Technology Diffusion. Comparative Advantage and Optimal Trade Policy. e. inefficiently high equilibrium unemployment, the optimal trade policy is an import tariff in a capital-abundant country and an export subsidy in a labor-abundant country. 1 Introduction In quantitative finance area, optimal trade execution (OTE), also called optimal liquidation, is a critical issue in many investment activities [7,16,19,24]. In Section 4, we examine the impact of relative-performance-based managerial delegation in firms and its interaction with the strength of network externalities on optimal trade policy. The final part of the analysis then investigates optimal trade policy for a small open economy in the competitive equilibrium. Optimal use of capital controls, however, dampens the time-variation of optimal trade taxes. . 3159475 Corpus ID: 219362227; Inequality, Redistribution and Optimal Trade Policy: A Public Finance Approach @article{Hosseini2018InequalityRA, title={Inequality, Redistribution and Optimal Trade Policy: A Public Finance Approach}, author={Roozbeh Hosseini and Ali Shourideh}, journal={Microeconomics: Welfare Economics \& Collective Decision Micro to Macro: Optimal Trade Policy with Firm Heterogeneity (with Arnaud Costinot and Andrés Rodriguez-Clare) Incomplete Markets and Aggregate Demand Efficiency and Information Transmission in Bilateral Trading (with Robert Shimer) The Taxation of Micro to macro: optimal trade policy with firm heterogeneity. 1See, for example, Helpman and Krugman (1989), Feenstra (2004). Crozet, F. The model’s predictions are supported by Yet we know little about its implications for how nations should conduct their trade policy. We find that this optimal trade policy yields much smaller gains than the baseline for the U. Submit & Leave (SL) policy (as baseline), the Q-learning algorithm, and the latest hybrid method that combines the Almgren-Chriss model and reinforcement learning. Optimal trade policy 4. Perhaps surprisingly, In this paper, we characterize optimal trade policy in a generalized version of the trade model with monopolistic competition and firm-level heterogeneity developed by Melitz (2003). As Home does not consider technology diffusion, the policy can potentially generate welfare loss. W e. Optimal Trade Policy with International Technology Diffusion Yan Bai * Keyu Jin † Dan Lu ‡ Hanxi Wang § Abstract We study optimal dynamic trade policies in an Eaton-Kortum model with technology dif-fusion through trade. We study optimal dynamic trade policies in an Eaton-Kortum model with technology diffusion through trade. Generally, trade imbalances are not predictive of optimal Optimal trade policy with monopolistic competition and heterogeneous firms Jan I. 0033-5533. The main advances in this area are twofold. optimal trade policy is always driven by the standard terms of trade externality. S. and results in a loss for China. Our baseline environment is a canonical model of intra-industry trade with monopo- II. 2139/ssrn. COMPARATIVE ADVANTAGE AND OPTIMAL TRADE POLICY Arnaud Costinot Dave Donaldson Jonathan Vogel Iva´n Werning The theory of comparative advantage is at the core of neoclassical trade theory. Haaland Anthony J. Trionfetti. OPTIMAL TRADE POLICY AND THE ROLE OF CONJECTURAL VARIATIONS: THE CASE OF DUOPOLY In this and subsequent sections we characterize optimal gov-ernment policy in the presence of oligopolistic competition among domestic and foreign firms in international markets. ISSN. 309-321. 1 Examples of optimal trade taxes include (i) a zero import tar- ing optimal trade policy and show that our main insights are robust. Version: Original manuscript. 1 If domestic firm d do not have foreign local firm 1’s corporate control rights We now proceed to discuss the optimal trade policy of domestic country. The theory of comparative advantage is This study considers a differentiated duopoly, including domestic and foreign enterprises, in trade, analyzes the impacts of product differentiation and productivity variance on equilibrium results, and explores the optimal trade policy in different competition modes. 1 Recent research in the international trade field has led to an explosion of new empirical methods that can be used to study the aggregate and distributional consequences of many types of changes to the economic environment (e. ,Babiker(2005),Elliott et al. Our main result can be stated as follows. 3386/w19689 Issue Date December 2013. and China, that are uniform across certain industries. If the number of domestic firms is not too large, an export subsidy is optimal; but if it is sufficiently large, the optimal policy would be export tax. Under this stage, the domestic government maximizes its welfare to Optimal trade and capital control policies are characterized under a dynamic model with endogenous trade imbalances. The process of innovation and diffusion is one in which new ideas are combined Wang, and Zhu (2024) characterize optimal trade and industrial policies, in the U. For example, should import sectors with weaker comparative ship between comparative advantage and optimal trade policy. Free trade is op-timal only when a labor market is initially efficient. Section 3 analyzes optimal trade policy in a network goods oligopoly with no managerial delegation, taking price and quantity competition into account separately. Econ. These policies take into account selection effects, country endowments, and other Trade imbalances are a salient feature of international trade, yet we know little about their implications for optimal trade policy. The process of innovation and diffusion is one in which new ideas are combined with insights from others. , BS study the optimal trade policy in a dynamic Ricardian economy with two countries – Home and Foreign – where inelastically supplied labor is the only factor of production. First, there has been substantial progress in understanding optimal trade policy in a variety of neoclassical and Trade policy analysis has been a central focus of research since at least the pioneering optimal tariff analysis in Bickerdike (1907). 2Through all the paper we de ne the terms of trade as the price of imports relative to the price of exports. For example, does a government have more incentives to the design of optimal trade policy when heterogeneous firms select into exporting. Optimal Trade Policy and the Role of Conjectural Variations: The Case of Duopoly In this and subsequent sections we characterize optimal government policy in the presence of oligopolistic competition among domestic and foreign firms in international ERIA-DP-2016-25 ERIA Discussion Paper Series Optimal Trade Policy and Production Location Ayako OBASHI* Toyo University September 2016 Abstract: This paper studies the role of trade policies in a theoretical framework considering the firm’s DOI: 10. Despite their rich structure, existing analyses have mostly quantified the efficacy of easy-to-implement but sub II. 1531-4650 ficacy of trade policy at tackling environmental emission (e. It is ship between comparative advantage and optimal trade policy. Yet we know little about its implications for how nations should conduct their trade policy. View PDF View article View in Scopus Google Scholar. We study optimal dynamic trade policies in an Eaton-Kortum model with technology dif-fusion through trade. taxes on accumulation of Downloadable (with restrictions)! Optimal trade and capital control policies are characterized under a dynamic model with endogenous trade imbalances. Venables 12th November 2014 Abstract This paper derives optimal trade and domestic taxes for a small open economy containing a monopolistically competitive (MC) sector in which firms may have heterogeneous productivity levels. Share. In the absence of capital controls, optimal trade protection In this paper, we study optimal policies in the extended multi-sector Ricardian trade models, encompassing various labor market specifications that are widely used in quantitative works. Our qualitative results—that trade taxes should be monotone in comparative advantage—and our quantitative results—that such trade taxes lead to substantially larger welfare gains than uniform trade taxes—illustrate that the design of and gains associated with optimal trade policy may crucially depend on the extent of micro-level heterogeneity. Bradford (2006) and Matschke (2010) extends the lobby game in Grossman and Helpman In a two-country model where firms compete in domestic and foreign countries, Dixit showed that the optimal trade policy depends on the number of foreign and domestic firms. Trade thus affects technology by determining the distribution from which producers draw their insights. (2016)). Sector-specific tariffs are summarized by a matrix of partial supply elasticities and the share of Home’s import in foreign incomes, reflecting Home’s import market power. impact on how they think about trade policy. 2 (February 3, 2015): 659–702. I then study the optimal trade policy in a large open economy, where the terms-of-trade externality exists and interacts with the labor-market motive. “Comparative Advantage and Optimal Trade Policy. In the absence of capital controls, optimal trade protection is counter-cyclical. J. X LinkedIn Email. Arnaud Costinot, Dave Donaldson, Jonathan Vogel & Ivan Werning. g. The process of innovation and diffusion is one in which new ideas are Downloadable (with restrictions)! We study optimal dynamic trade policies in an Eaton-Kortum model with technology diffusion through trade. ” The Quarterly Journal of Economics 130, no. Yan Bai, Keyu Jin, Dan Lu and Hanxi Wang. , 76 (2008), pp. Generally, trade imbalances are not predictive of optimal policy. In this study, we build stylized analytical models to explore the optimal choice of a trade-in-return policy. The Home country’s government has three instruments at its disposal: import and export taxes – potentially different across different goods – and capital controls i. Each firm produces a single product that may be a perfect or imperfect sub- The aim of this paper is to study optimal trade policy in a version of the Krugman (1980) model of intra-industry trade due to monopolistic competition and increasing returns. No 32097, NBER Working Papers from National Bureau of Economic Research, Inc Abstract: We study optimal dynamic trade policies in an Eaton-Kortum model with technology diffusion through trade. M. Alternatively, some firms have a partial-trade-in-return (PTR) policy under which trade-in consumers who return a newly purchased product only receive a refund for the amount of money they paid (without including the trade-in-rebate). Working Paper 19689 DOI 10. The Brecher (1974b) study optimal trade policy in a Heckscher-Ohlin model with unemploy-ment. We provide a general formula for optimal unilateral policies in multi-sector, general-equilibrium Ricardian models with various widely adopted labor market specifications. NBER Working Paper 21989 (2016) Google Scholar. Crozet and Trionfetti, 2008. Trade costs and the home market effect. Dave Donaldson, Jonathan Vogel, and Iván Werning. Int. yob qyseln fsmvfjv krssdw zcm lbry entoh ttqr jyvs zmtb