Endogenous Timing in Trade Policy Under the Three-Country Model
2016
This chapter provides a comprehensive and consistent explanation for the following result: a government with a smaller number of firms becomes a leader and provides a subsidy to home firms, whereas a government with a larger number of firms moves second and imposes a tax on domestic firms in the three-country model. This chapter also presents a comparison of the welfare of each country under free trade and under bilateral intervention, from which we derive policy implications.
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