DP38 Customs Union, Tariff Reform and Trade in Differentiated Products
Author(s): | Anthony Venables |
Publication Date: | January 1985 |
Keyword(s): | Customs Union, Differentiated Products, Monopolistic Competition, Tariffs, Tax Policy |
JEL(s): | 321, 422 |
Programme Areas: | International Trade and Regional Economics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=38 |
The paper analyses tax and tariff policy for trade between economies which each contain a monopolistically competitive industry producing differentiated products. The consequences of tax changes by a single country are examined, and the general desirability of taxing imports more heavily than domestically produced goods is established. Customs union theory is analysed by studying coordinated tax changes by a group of countries; circumstances under which customs union formation and enlargement will benefit members are found. Game theoretic techniques are used to investigate which countries will coalesce into a customs union.