Optimal policies with strategic distortions

Kala Krishna; Marie Thursby

doi:10.1016/0022-1996(91)90040-D

Optimal policies with strategic distortions

Kala Krishna
, Marie Thursby

Economics

Research output: Contribution to journal › Article › peer-review

20 Scopus citations

Abstract

This paper analyzes the jointly optimal levels of a variety of policy instruments when markets are imperfectly competitive. A targeting principle to identify optimal policies under imperfect competition is derived using the concept of a 'strategic distortion'. This allows us to interpret when trade policy is first best and links the literature on optimal policies with imperfect competition to the standard targeting literature. We show that optimal tax/subsidy policy depends crucially on the presence of other regulations and assumptions about market segmentation.

Original language	English (US)
Pages (from-to)	291-308
Number of pages	18
Journal	Journal of International Economics
Volume	31
Issue number	3-4
DOIs	https://doi.org/10.1016/0022-1996(91)90040-D
State	Published - Nov 1991

All Science Journal Classification (ASJC) codes

Finance
Economics and Econometrics

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10.1016/0022-1996(91)90040-D

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title = "Optimal policies with strategic distortions",

abstract = "This paper analyzes the jointly optimal levels of a variety of policy instruments when markets are imperfectly competitive. A targeting principle to identify optimal policies under imperfect competition is derived using the concept of a 'strategic distortion'. This allows us to interpret when trade policy is first best and links the literature on optimal policies with imperfect competition to the standard targeting literature. We show that optimal tax/subsidy policy depends crucially on the presence of other regulations and assumptions about market segmentation.",

author = "Kala Krishna and Marie Thursby",

note = "Funding Information: *We are grateful to two anonymous referees, Mark Bagnoli, Richard Baldwin, Larry Blume, Elias Dinopoulos, Avinash Dixit, Allan Drazen, Roger Gordon, Gene Grossman, Richard Jensen, Peter Neary, Maury Obstfeld, Dani Rodrik, Barbara Spencer, Jay Wilson and participants of seminars at the North East Universities Development Consortium Conference, the NBER Summer Institute, Midwest International Economics Meetings, Columbia University, University of Kentucky, University of Pennsylvania, Purdue University, and December 1987 American Economic Association meetings for comments on a related paper. Krishna gratefully acknowledges research support from the Center for International Affairs at Harvard and the Clark Fund. Thursby gratefully acknowledges research support from the National Science Foundation under grant No. RII-860-0404 and the Ford Foundation.",

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doi = "10.1016/0022-1996(91)90040-D",

language = "English (US)",

volume = "31",

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N2 - This paper analyzes the jointly optimal levels of a variety of policy instruments when markets are imperfectly competitive. A targeting principle to identify optimal policies under imperfect competition is derived using the concept of a 'strategic distortion'. This allows us to interpret when trade policy is first best and links the literature on optimal policies with imperfect competition to the standard targeting literature. We show that optimal tax/subsidy policy depends crucially on the presence of other regulations and assumptions about market segmentation.

AB - This paper analyzes the jointly optimal levels of a variety of policy instruments when markets are imperfectly competitive. A targeting principle to identify optimal policies under imperfect competition is derived using the concept of a 'strategic distortion'. This allows us to interpret when trade policy is first best and links the literature on optimal policies with imperfect competition to the standard targeting literature. We show that optimal tax/subsidy policy depends crucially on the presence of other regulations and assumptions about market segmentation.

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SP - 291

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JO - Journal of International Economics

JF - Journal of International Economics

IS - 3-4

ER -

Optimal policies with strategic distortions

Abstract

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