Essays on Endogenous Trade Policies

Detta är en avhandling från Department of Economics, Lund University, Box 7082, 220 07 Lund

Sammanfattning: This thesis consists of a collection of essays on endogenous trade policies and may briefly be summarized as follows. The first essay empirically examines determinants of bilateral trade protection originating from normative trade theory, endogenous trade-policy studies, and political arguments put forward in the public debate. Overall protection level measures are constructed and the data sample includes a total of 426 trade relations. The maximum likelihood estimation results provide strong empirical support for five of the seven tested determinants, and since no omitted variable problem can be detected, the empirical model appears to incorporate all the factors functioning as determinants at the time of observation. The explanatory variables revealed to influence the bilateral protection level are the import penetration level of goods produced by the trade partner, the share of imports from the trade partner characterised by intra-industry trade, and dummy variables capturing if the trade relation is characterized by the joint bilateral customs union participation, a rich importing country and a middle-income exporting country or a large importing country and a small exporting country. A performed sensitivity analysis shows that the results appear to be unaffected by multicollinearity and endogeneity as well as omitted variable problems. The second essay theoretically examines the economic role of trade policy in a Krugman and Venables (1995) model modified to allow for country-specific trade cost levels and incorporate trade costs in the homogenous goods sector. Specifically, unilateral trade-cost effects on the equilibrium structure are identified and the resulting national welfare consequences obtained in order to identify the endogenous trade-policy positions when trade policies are used as strategies in a game between benevolent governments. It is revealed that the existence of trade costs in the homogenous goods sector has a considerable influence on equilibrium structure effects of differentiated goods trade policies and, hence, on equilibrium strategies in differentiated goods trade. In particular, the identified equilibrium strategies in the differentiated goods sector incorporate substantially lower protection levels when homogenous goods trade costs are allowed for. Moreover, it is shown that the identified policy equilibria always generate locational equilibria characterised by a complete international dispersion of production. The third essay is theoretical and explores the economic role of trade policy in a new economic geography model based on intermediate input linkages within as well as between sectors. Specifically, the effects of unilateral trade policies on the international production and trade pattern are identified in a Krugman and Venables (1996) model modified to allow for asymmetric trade cost levels across sectors and countries. Moreover, national welfare effects of these policies are examined and the trade-policy determination is endogenised in a trade-policy game between benevolent governments. It is revealed that the presence of inter-industry input-output linkages between firms imposes counteracting effects on the international production and trade pattern. Furthermore, it is shown that the equilibrium strategies are normally free-trade policy positions and that locational equilibria generated from the game can be characterised either by a complete international specialisation of production or a complete international dispersion of industry categories.

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