Technological upgrading under tariffs and equivalent quotas

Jiunn Rong Chiou, Hong Hwang, Chao Cheng Mai

Research output: Contribution to journalArticlepeer-review

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Abstract

This paper compares the effect of tariffs and that of equivalent quotas on the domestic firm's production technology choice when it competes with a foreign firm in the domestic market. It is shown that under Bertrand price competition, the ranking of technology under tariff protection and quota protection is ambiguous, as it depends on the relative strength of the strategic vs output effects. The equivalent quota regime can generate a higher-technology (implying a lower production cost) choice than the tariff regime if the strategic effect dominates the output effect. In contrast, the technology level is necessarily higher under the tariff regime than under the equivalent quota regime when the firms engage in Cournot quantity competition.

Original languageEnglish
Pages (from-to)849-858
Number of pages10
JournalReview of International Economics
Volume14
Issue number5
DOIs
StatePublished - Nov 2006

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