Tariff policy and transport costs under reciprocal dumping*

Multiproduct multinationals and reciprocal FDI dumping

Global patterns of FDI and trade are remarkably similar, yet mainstay theory has them as substitutes. We posit a model where multiproduct, final-goods firms simultaneously engage in intraindustry FDI and intraindustry trade. The logic behind this two-way FDI is analogous to that of two-way trade in the Brander–Krugman reciprocal-dumping model. Namely, multiproduct firms use trade costs to reduc...

Internationalisation of Economic Policy Programme Research Paper 2002 / 01 Protection by Tariff Barriers and International Transport Costs

Using estimates of protection in the EU market against US exports, this paper illustrates the relative importance of natural and policy sources of protection and the measurement errors induced in the measurement of effective protection by omitting transactions costs. It also considers protection in the EU 'domestic' and export market, and the implications of the elimination of tariff barriers o...

Alternative Approaches to Reciprocal Tariff Liberalization

An empirical assessment of the welfare effects of reciprocal dumping

Can two-way trade in similar products lead to lower welfare than if such trade was banned? Theory answers yes. To empirically investigate this proposition we examine Swedish imports of bottled water. Assuming one-shot (Bertrand and Cournot) competition, we can use the estimates from a structural model of demand to uncover marginal costs. We simulate the effect on consumer and producer surplus o...

Patient dumping, outlier payments, and optimal healthcare payment policy under asymmetric information

We analyze a rationale for official authorization of patient dumping in the prospective payment policy framework. We show that when the insurer designs the healthcare payment policy to let hospitals dump high-cost patients, there is a trade-off between the disutility of dumped patients (changes in hospitals' rent extraction due to low-severity patients) and the shift in the level of cost reduct...