Yungho Weng

Cournot-Bertrand competition: a revisit of strategic trade policy in the third-market model

Purpose - – The purpose of this paper is to discuss the optimal policy settings of the home government for any combination of strategic variables adopted by home and foreign firms under Brander and Spencer’s third-market model framework. Design/methodology/approach - – This paper follows all the assumptions of Brander and Spencer with only two modifications: firms produce differentiated products, and firms choose different strategic variables. A two-stage game is set and the subgame-perfect Nash equilibrium is deduced following backward induction. Findings - – The authors arrive at a general, simple rule to determine the optimal policy of the home government for any combination of strategic variables: regardless of the strategic variable of the domestic firm, the optimal policy of the home country is an export subsidy (tax) as long as the foreign firm’s strategic variable is output (price). The optimal subsidy or tax of the home country is shown to move the equilibrium to the Stackelberg equilibrium where the domestic firm behaves as the leader while the foreign firm behaves as a follower under free trade. With appropriate interpretations and a suitable caveat, the above results still hold in the case with multiple foreign firms which may choose different strategic variables. Originality/value - – This paper fills the gap in the literature, and provides some more general results not easily detected in the original model of Brander and Spencer or Eaton and Grossman.

Do Labor Unions Hinder or Boost International Outsourcing? Evidence from U.S. Manufacturing

This article provides empirical evidence that labor unions can influence firms’ international outsourcing decisions in the U.S. manufacturing sector. There is a negative effect of the current level of unionism and a positive effect of the previous level of unionism on the firms’ international outsourcing intensity. Our results support the proposition put forward by Lommerud et al. (2009) that labor unions hinder firms’ international outsourcing behavior, if the decision to outsource is made no later than the wage-employment bargaining. However, stronger labor unions still induce international outsourcing if firms’ decisions are made subsequent to wage-employment bargaining.

An economy-wide analysis of impacts on Taiwan of reducing tariff escalation on agriculture-related products in WTO Doha Round negotiations

Purpose - – The purpose of this paper is to assess the degree of tariff escalation in Taiwans agriculture-related commodities and the economy-wide impact of tariff harmonization. Design/methodology/approach - – A computable general equilibrium model of the Taiwan economy is applied to simulate for the economy-wide impact of three alternative proposals that reduce tariff rates as well as the degree of tariff escalation in agriculture-related products. Findings - – The paper shows that reduction in tariff wedge helps increase social welfare of Taiwan at the expense of some agricultural sectors. Based on the pair-wise comparisons of the three tariff reduction proposals, the scenario where the upstream products have the least reduction would have agricultural sectors fare better than in the other scenarios where more negative impact on output and employment would occur to agricultural sectors. Originality/value - – The paper assesses quantitatively the economy-wide impact of reducing tariff wedges between unprocessed and processed products, which is rarely seen in the literature using a detailed computable general equilibrium model.

Fishery Subsidies, Illegal Fuel Trading, and Conservation

Abstract This article incorporates illegal fuel trading behavior to examine the effects of changes in the fishery subsidy rate, detection effort, and fish price on the level of fishing, illegal fuel trading, and fish biomass. The corresponding effects on the fishermans profits and the profits of the oil company that supplies the raw fuel to the fishery are also examined. The findings are, first, that the subsidy policy benefits the oil company, but its effects on the fisherman are ambiguous. Second, an increase in detection effort leads to less illegal activity in relation to fuel trading and more legal fishing resulting in less fish biomass. The detection policy hurts the oil company, the fisherman who engages in fuel trading, and resource conservation. Finally, an increase in fish price leads to a similar result as an increase in detection effort, but the effects on the fishermans profits are reversed. The oil company also benefits from increasing fish price. JEL Classification Codes: Q22, Q28