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- W2912163335 abstract "Despite compelling rationale based on the theory of comparative advantage for free trade, many countries adopt restrictive trade practices. In this paper we investigate this puzzle in a stylized two-country two-good Ricardian model of international trade.Governments can offer protection to domestic industries via industrial subsidy policy in this model. We prove the existence of a Nash equilibrium in the two-player game where industries choose the level of specialization. We determine the necessary conditions for complete specialization in (a) the free-trade regime; and (b) the protectionist regime implemented through industrial subsidy policy. Our results show that if the government intends to promote complete specialization, then a high degree of comparative advantage and a large elasticity of substitution between export and import goods are required.Empirical evidence on these two parameters indicate that complete specialization is unlikely to survive in the protectionist regime." @default.
- W2912163335 created "2019-02-21" @default.
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- W2912163335 date "2018-01-01" @default.
- W2912163335 modified "2023-09-26" @default.
- W2912163335 title "Complete Specialization and Government Intervention in International Trade" @default.
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- W2912163335 doi "https://doi.org/10.2139/ssrn.3190595" @default.
- W2912163335 hasPublicationYear "2018" @default.
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