Government policies in a granular global economy

Using a granular model of international trade, we study the rationale and implications various government interventions targeted at large individual firms. In antitrust regulation, governments face an incentive to be overly lenient towards domestic mergers in comparative advantage sectors. trade policy, targeting foreign exporters rather than entire sectors minimizes pass-through import tariffs into consumer prices, shifting burden producers. industrial subsidizing ‘national champions’ is generally suboptimal closed economies as it leads excessive build-up market power, yet may become unilaterally welfare improving open cost consumers.