Type

Working Paper

Authors

J. Peter Neary
Dermot Leahy

Subjects

Economics

Topics
subsidies competition imperfect commercial policy r d subsidies industrial policy strategic industrial policy f12 cost reducing investment market expanding investment export subsidies strategic trade policy l13

Robust rules for industrial policy in open economics (2001)

Abstract The theory of strategic trade policy yields ambiguous recommendations for assistanceto exporting firms in oligopolistic industries. However, some writers have suggested that investment subsidies are a more robust recommendation than export subsidies. We show that, though ambiguous in principle, the case for investment subsidies is reasonably robust in practice. Except when functional forms exhibit arbitrary non-linearities, it holds under both Cournot and Bertrand competition, with either cost-reducing or market-expanding investment,and with or without spillovers. Only if firms have strong asymmetries in their investment behaviour and engage in Bertrand competition is an investment tax clearly justified.
Collections Ireland -> University College Dublin -> Economics Working Papers & Policy Papers
Ireland -> University College Dublin -> School of Economics
Ireland -> University College Dublin -> College of Social Sciences and Law

Full list of authors on original publication

J. Peter Neary, Dermot Leahy

Experts in our system

1
J. Peter Neary
University College Dublin
Total Publications: 79
 
2
Dermot Leahy
Maynooth University
Total Publications: 50