Hong Hwang

On the equivalence of tariffs and quotas under duopoly: A conjectural variation approach

Abstract The purpose of this paper is to use a conjectural variation approach to examine the equivalence of tariffs and quotas, set so as to result in the same equilibrium quantity of imports. We have demonstrated that whether tariffs and quotas are equivalent depends crucially upon the particular value of the conjectural variations. Specifically, in the case of equal import tariffs and quotas, the equivalence holds only in the Cournot case; otherwise the domestic price is lower or higher under quotas depending upon whether competition is less or more competitive than Cournot.

Optimum Discriminatory Tariffs under Oligopolistic Competition

This paper attempts to present a simple Cournot model to determine the optimal discriminatory tariff rates, when the international market is a homogeneous (heterogeneous) product market. In the model, there are two foreign firms located in two different countries competing for sales in a local market. When the firms sell a homogeneous product and the home country can impose differential tariffs on imports from different countries, then the tariff on the low-cost producer should be hgher. In particular, with constant marginal costs the tariff difference should equal half the cost difference. On the other hand, if the firms sell differentiated products with symmetric linear demands and technologies, then the weaker the degree of product differentiation, the greater is the tariff difference compared with the cost difference.

Export subsidies and oligopolistic rivalry between labor-managed and capitalist economies

Abstract The purpose of this paper is to examine the efficacy of export subsidization in a labor-managed economy. It will be shown that contrary to a capitalist economy, an export tax rather than a subsidy becomes an effective policy tool for a labor-managed economy to adopt in order to expand its market share. It is also demonstrated that an export subsidy of the domestic labor-managed country decreases the benefits of its own and the importing country, but increases the welfare of the foreign-competing capitalist.

Optimal Trade Policies and Production Technology in Vertically Related Markets

This paper shows that optimal trade policies for vertically related markets depend crucially on production technology. By employing a production function with variable-coefficient technology, it shows that return to scale is crucial in determining the direction of government intervention. Therefore, the assumption of fixed-coefficient production technologies, which has been popular in industrial organization and trade literature when modeling vertically related markets, should be used with caution.

Tariffs versus ratio quotas under duopoly

Abstract This paper presents a conjectural variations model of a duopoly to investigate the question of the equivalence of tariffs and ratio quotas. It is shown that whether or not tariffs and ratio quotas are equivalent is crucially dependent upon (i) the particular value of the conjectural variations parameter and (ii) the target ratio of imports to domestic production in question. Therefore, the monopolistic behavior of the domestic firm over consumers does not necessarily result in non-equivalence. This paper also demonstrates that the price under a ratio quota is always higher than that under a volume quota.

Domestic export subsidy and foreign welfare

Abstract In this paper we present an analysis based on imperfect competition to examine the conditions under which an export subsidy of the domestic country will not only increase its own welfare, but also raise the welfare of the importing country and hence the world as a whole. Under these conditions, it is then suggested that relaxation of GATT restrictions on export subsidies might be feasible to some extent.

Optimal Technology Subsidies vs Export Subsidies: A Strategic Approach

National governments, especially in developing countries, play a key role in certain international industries, particularly those high technology and high investment industries. By endogenizing the firms technology choice, this paper has developed a strategic approach to examine the economic effects of technology subsidy and/or export subsidy on the technology and output decisions. The main findings of this paper are as follows: (1) If the domestic government can prescribe only one policy to improve its competitiveness in the international market, then export subsidy is superior to technology subsidy. (2) It does not matter whether the technology and export subsidies are implemented simultaneously or sequentially — both policies can lead to the first-best solution: cost minimization in the technology choice and Stackelberg leader position in the export market. (3) To reach the cost-minimizing technology level, the tax revenue required is higher under sequential than that under simultaneous policy implementation.

The Tariff-Jumping Argument and Location Theory

When examining the tariff-jumping effect, the literature emphasizes the cost-induced effect, which states that a foreign firm has an incentive to jump over the tariff wall in order to locate in a foreign territory, and thereby escape tariffs. The authors set up a location model to show what they refer to as the location-induced effect on tariff-jumping. This location-induced effect, together with the traditional cost-induced effect, makes tariff-jumping more (less) likely to take place when the production function in question exhibits decreasing (increasing) returns to scale.

Optimal export subsidies and marginal cost differentials

Abstract This paper examines the relationship between the difference in optimal subsidies and that in marginal costs for different exporting countries. It shows that this relationship crucially depends upon the concavity of the market demand curve. This result provides policy-makers with useful information when implementing trade policies.

Innovation, Imitation and Intellectual Property Rights in Developing Countries

This paper sets up a vertically related market model in which imitation and innovation are endogenously determined to study the impact of intellectual property rights (IPR) protection on less‐developed countries. It shows how a less‐developed country switches from imitation to innovation as it develops. It is also found that the relationship between IPR protection and economic development is ‐shaped. The IPR protection tends to go down and then go up as income rises. This finding also conforms with that in the empirical literature on IPR protection.