دانلود رایگان مقاله آیا رهبری سیاست تجاری و صنعتی و ورود افراطی ناکارآمدی اجتماعی

Abstract

This paper analyzes the welfare effects of industrial and trade policy instruments (output subsidies or/and import tariffs) in an international Cournot oligopoly and compares the social efficiency of specific policy instrument or dual policy instruments (output subsidies-cum-import tariffs) with free entry of domestic firms. It first demonstrates that free entry of domestic firms is always socially excessive irrespective of the policy regimes rate in an open economy. It then shows that optimal tariff rate and output subsidy rate under free entry of domestic firms will be lower than the one at regulated entry when the scale of domestic market is moderate; for dual policy regime, the optimal output subsidy rate at free entry is lower than the one at regulated entry, while the optimal tariff rate at free entry is higher than the one at regulated entry. Furthermore, even though the need of dual policy for welfare improvement is degenerate to be suboptimal with the free entry of domestic firms, but it is still superior to the subsidy policy.

5. Conclusions

Is free entry desirable for social efficiency in an open economy? This important question has been studied extensively in a closed economy. It is pertinent to consider whether anti-competition entry regulation policies should be relaxed when both import tariff and output subsidy instruments are adopted or either one instrument is used. In this paper, we analyzed the welfare effects of industrial and trade policy instruments (output subsidies and import tariffs) under Cournot oligopoly and compared the social efficiency of specific policy instrument or dual policy instruments with free entry of domestic firms. We showed that 1. The free entry number of domestic firms is greater than the number of firms in the welfare-maximizing equilibrium. Free entry is always socially excessive irrespective of the policy regimes, which is different from the results already obtained when domestic distortion is existed; 2. Under free entry of domestic firms with dual policy, the optimal subsidy rate at free entry is lower than the one at regulated entry, while the optimal tariff rate at free entry is higher than the one at regulated entry; 3. Under free entry of domestic firms, the optimal output subsidy rate (tariff rate) at free entry equilibrium is highly possible (should be) lower than at regulated entry. The welfare implications of policies are that 1. The social welfare under import tariff is superior to the one under output subsidy at free entry equilibrium; 2. The dual subsidy-tariff policy is suboptimal and tariff is superior to subsidy at free entry equilibrium. We further claimed that the dual subsidy-tariff policy is suboptimal and tariff is superior to subsidy at free entry equilibrium which is in stark contrast with the policy recommendation from general equilibrium analysis. Tariff policy is highly prohibited and competition policy is being promoted within the domestic economy following the guidelines of WTO, but many domestic governments are under domestic political pressures to provide subsidies to domestic firms and that creates excess competition and makes the social welfare worse-off. Based on the real-economy observations and our theoretical analysis, we argued that the governments should be carefully coordinate industrial and trade policy with competition policy for improving domestic social welfare.