Abstract
Given an endogenous market structure, this research investigates the effects of tariff and equivalent quota policies on foreign firms’ FDI decisions. Findings show that foreign firms have symmetric (asymmetric) decisions in terms of FDI versus export under a tariff (quota) policy. Furthermore, FDI is more likely to occur under the tariff than the quota regime, but the former is definitely more (less) desirable than the latter in terms of domestic (world) welfare. Finally, a more cost-efficient firm is more likely to engage in FDI under either the tariff or the quota regime.
References
Beladi, H., S. Marjit, and A. Chakrabarti. 2009. “Tariff Jumping and Joint Ventures.” Southern Economic Journal 75: 1256–69. https://doi.org/10.1002/j.2325-8012.2009.tb00957.x.Search in Google Scholar
Bhagwati, J. N. 1965. “On the Equivalence of Tariffs and Quotas.” In Trade, Growth, and the Balance of Payments: Essays in Honor of Gottfried Haberler, edited by R. E. Baldwin. Chicago: Rand McNally.Search in Google Scholar
Bhagwati, J. N. 1968. “More on the Equivalence of Tariffs and Quotas.” The American Economic Review 58: 142–6.Search in Google Scholar
Blonigen, B. A., K. Tomlin, and W. Wilson. 2004. “Tariff-jumping FDI and Domestic Firms’ Profits.” Canadian Journal of Economics 37: 656–77. https://doi.org/10.1111/j.0008-4085.2004.00242.x.Search in Google Scholar
Chen, H. Y., and H. Hwang. 2006. “Tariffs versus Quotas under Market Price Uncertainty.” Review of World Economics 142: 181–94. https://doi.org/10.1007/s10290-006-0062-z.Search in Google Scholar
Chiou, J. R., H. Hwang, and Y. S. Lin. 2005. “On the Equivalence of Tariffs and Quotas under a Revenue Constraint.” Review of Development Economics 9: 343–58. https://doi.org/10.1111/j.1467-9361.2005.00280.x.Search in Google Scholar
Davidson, C., and A. Mukherjee. 2007. “Horizontal Mergers with Free Entry.” International Journal of Industrial Organization 25: 157–72. https://doi.org/10.1016/j.ijindorg.2006.03.003.Search in Google Scholar
De Santis, R., and F. Stahler. 2004. “Endogenous Market Structures and the Gains from Foreign Direct Investment.” Journal of International Economics 64: 545–65. https://doi.org/10.1016/j.jinteco.2003.08.008.Search in Google Scholar
Etro, F. 2004. “Innovation by Leaders.” The Economic Journal 114: 281–303. https://doi.org/10.1111/j.1468-0297.2004.00210.x.Search in Google Scholar
Etro, F. 2008. “Stackelberg Competition with Endogenous Entry.” The Economic Journal 118: 1670–97. https://doi.org/10.1111/j.1468-0297.2008.02185.x.Search in Google Scholar
Fung, K. C. 1989. “Tariffs, Quotas, and International Oligopoly.” Oxford Economic Papers 41: 749–75. https://doi.org/10.1093/oxfordjournals.oep.a041925.Search in Google Scholar
Han, T. D., H. M. Emranul, and A. Mukherjee. 2022. “Social Efficiency of Entry in an Open Economy.” The B.E. Journal of Economic Analysis & Policy 22: 203–19. https://doi.org/10.1515/bejeap-2020-0097.Search in Google Scholar
Horstmann, I., and J. Markusen. 1986. “Up the Average Cost Curve: Inefficient Entry and the New Protectionism.” Journal of International Economics 20: 225–47. https://doi.org/10.1016/0022-1996(86)90020-6.Search in Google Scholar
Hwang, H., and C. C. Mai. 1988. “On the Equivalence of Tariffs and Quotas under Duopoly: A Conjectural Variations Approach.” Journal of International Economics 24: 373–80. https://doi.org/10.1016/0022-1996(88)90044-x.Search in Google Scholar
Hwang, H., and C. C. Mai. 2002. “The Tariff-Jumping Argument and Location Theory.” Review of International Economics 10: 361–8. https://doi.org/10.1111/1467-9396.00337.Search in Google Scholar
Hwang, H., K. F. Kao, and C. H. Peng. 2011. “Tariff and Quota Equivalence in Vertically Related Markets.” Review of Development Economics 15: 19–32. https://doi.org/10.1111/j.1467-9361.2010.00590.x.Search in Google Scholar
Hwang, H., C. H. Peng, and H. L. Wu. 2013. “Tariffication and Welfare in a Differentiated Duopoly.” The World Economy 36: 899–911. https://doi.org/10.1111/twec.12048.Search in Google Scholar
Ishikawa, J., and K. Miyagiwa. 2008. “Price Undertakings, VERs, and Foreign Direct Investment: The Case of Foreign Rivalry.” Canadian Journal of Economics 41: 954–70. https://doi.org/10.1111/j.1540-5982.2008.00492.x.Search in Google Scholar
Ishikawa, J., H. Morita, and H. Mukunoki. 2016. “Trade Liberalization and Aftermarket Services for Imports.” Economic Theory 62: 719–64. https://doi.org/10.1007/s00199-015-0925-4.Search in Google Scholar
Itoh, M., and Y. Ono. 1982. “Tariffs, Quotas and Market Structure.” Quarterly Journal of Economics 97: 295–305. https://doi.org/10.2307/1880759.Search in Google Scholar
Itoh, M., and Y. Ono. 1984. “Tariffs vs. Quotas under Duopoly of Heterogeneous Goods.” Journal of International Economics 17: 359–73. https://doi.org/10.1016/0022-1996(84)90030-8.Search in Google Scholar
Marjit, S., and A. Mukherjee. 2013. “Foreign Competition and Social Efficiency of Entry.” Economic Modelling 32: 108–12. https://doi.org/10.1016/j.econmod.2013.01.032.Search in Google Scholar
Marjit, S., and A. Mukherjee. 2015. “Endogenous Market Structure, Trade Cost Reduction, and Welfare.” Journal of Institutional and Theoretical Economics 171: 493–511. https://doi.org/10.1628/093245615x14322754804672.Search in Google Scholar
Markusen, J. R., and F. Stähler. 2011. “Endogenous Market Structure and Foreign Market Entry.” Review of World Economics 147: 195–215. https://doi.org/10.1007/s10290-010-0085-3.Search in Google Scholar
Matschke, X. 2003. “Tariff and Quota Equivalence in the Presence of Asymmetric Information.” Journal of International Economics 61: 209–23. https://doi.org/10.1016/s0022-1996(03)00002-3.Search in Google Scholar
McGuire, M. C., and H. Ohta. 2005. “Implicit Mercantilism, Oligopoly and Trade.” Review of International Economics 13: 165–84. https://doi.org/10.1111/j.1467-9396.2005.00497.x.Search in Google Scholar
Melitz, M. 2003. “The Impact of Trade on Intra-industry Reallocations and Aggregate Industry Productivity.” Econometrica 71: 1695–725. https://doi.org/10.1111/1468-0262.00467.Search in Google Scholar
Motta, M. 1992. “Multinational Firms and the Tariff-Jumping Argument: A Game Theoretic Analysis with Some Unconventional Conclusions.” European Economic Review 36: 1557–71. https://doi.org/10.1016/0014-2921(92)90006-i.Search in Google Scholar
Prusa, T. J. 1992. “Why Are So Many Antidumping Petitions Withdrawn?” Journal of International Economics 33: 1–20. https://doi.org/10.1016/0022-1996(92)90047-n.Search in Google Scholar
Shibata, H. 1968. “A Note on the Equivalence of Tariffs and Quotas.” The American Economic Review 58: 137–42.Search in Google Scholar
Shih, P. C., H. Hwang, and C. H. Peng. 2019. “Parallel Trade with an Endogenous Market Structure.” The World Economy 42: 1224–33. https://doi.org/10.1111/twec.12727.Search in Google Scholar
© 2023 Walter de Gruyter GmbH, Berlin/Boston
Articles in the same Issue
- Frontmatter
- Research Articles
- Overconfidence and Public Intoxication Arrest: Evidence from a University Town Police Log
- The Changing Determinants of Juvenile Crime
- Failing Young and Temporary Workers? The Impact of a Disruptive Crisis on a Dual Labour Market
- Productivity, Innovation Spillovers, and Mergers: Evidence from a Panel of U.S. Firms
- Trade Policies and FDI with an Endogenous Market Structure
- Is There a Business Cycle Effect on the Incidence of Dual Job Holding?
- The Impact of Environmental Taxation on Wage Inequality in the Presence of Subsidizing Renewable Energy
- The Competitive Foundations of Price Cap Regulation
- Letters
- Exploring the Existence of a Short-Run Kuznets Curve: Does the Fourth Industrial Revolution Affect Income distribution?
- MRS Functions and the Pareto Interval in Public Good Provision
- Optimal Imprisonment with General Enforcement of Law
- Immigration and Perceived Social Position. Insights from an Unintended Survey Experiment
Articles in the same Issue
- Frontmatter
- Research Articles
- Overconfidence and Public Intoxication Arrest: Evidence from a University Town Police Log
- The Changing Determinants of Juvenile Crime
- Failing Young and Temporary Workers? The Impact of a Disruptive Crisis on a Dual Labour Market
- Productivity, Innovation Spillovers, and Mergers: Evidence from a Panel of U.S. Firms
- Trade Policies and FDI with an Endogenous Market Structure
- Is There a Business Cycle Effect on the Incidence of Dual Job Holding?
- The Impact of Environmental Taxation on Wage Inequality in the Presence of Subsidizing Renewable Energy
- The Competitive Foundations of Price Cap Regulation
- Letters
- Exploring the Existence of a Short-Run Kuznets Curve: Does the Fourth Industrial Revolution Affect Income distribution?
- MRS Functions and the Pareto Interval in Public Good Provision
- Optimal Imprisonment with General Enforcement of Law
- Immigration and Perceived Social Position. Insights from an Unintended Survey Experiment