Optimal trade policies and production technology in vertically related markets
Journal
Review of International Economics
Journal Volume
15
Journal Issue
4
Pages
823-835
Date Issued
2007
Author(s)
Abstract
Abstract 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.
SDGs
Type
journal article