Input-output linkages and monopolistic competition : input distortion and optimal policies

Kohler, Wilhelm; Jung, Benjamin

Input-output linkages and monopolistic competition : input distortion and optimal policies

dc.contributor.author	Kohler, Wilhelm	de
dc.contributor.author	Jung, Benjamin	de
dc.date.accessioned	2024-04-08T09:01:18Z
dc.date.available	2024-04-08T09:01:18Z
dc.date.created	2021-08-30
dc.date.issued	2021
dc.description.abstract	In this paper, we provide a detailed analysis of a mechanism that distorts production towards too much use of primary factors like labor and too little use of intermediate inputs. The distortion results from two ingredients that are cornerstones of modern quantitative trade theory: monopolistic competition and input-output linkages. The distortion as such is unrelated to trade, but has important consequences for trade policy, including a positive first-order welfare effect from an import subsidy. For a crystal-clear view on the distortion, we first look at it in a single-sector, closed economy where the monopolistic competition equilibrium would be efficient without the presence of input-output linkages. We compare the social-planner-solution with the decentralized market equilibrium, and we identify first-best policies to correct the distortion. To analyze the trade policy implications we then extend our analysis to a setting with trade between two symmetric countries. We identify first-best cooperative policies, featuring nondiscriminatory subsidies of intermediate input use, aswell as non-cooperative trade policies where countries use tariffs to weigh terms of trade effects against benefits from correcting the input distortion.	en
dc.identifier.swb	1768032661
dc.identifier.uri	https://hohpublica.uni-hohenheim.de/handle/123456789/6647
dc.identifier.urn	urn:nbn:de:bsz:100-opus-19375
dc.language.iso	eng
dc.relation.ispartofseries	Hohenheim discussion papers in business, economics and social sciences; 2021,06
dc.rights.license	publ-mit-pod	en
dc.rights.license	publ-mit-pod	de
dc.rights.uri	http://opus.uni-hohenheim.de/doku/lic_mit_pod.php
dc.subject	Input-output linkages	en
dc.subject	Monopolistic competition	en
dc.subject	International trade	en
dc.subject	Allocational inefficiency	en
dc.subject	Optimal policy	en
dc.subject.ddc	330
dc.subject.gnd	Welthandel	de
dc.subject.gnd	Monopolistische Konkurrenz	de
dc.title	Input-output linkages and monopolistic competition : input distortion and optimal policies	de
dc.type.dcmi	Text	de
dc.type.dini	WorkingPaper	de
local.access	uneingeschränkter Zugriff	en
local.access	uneingeschränkter Zugriff	de
local.bibliographicCitation.publisherPlace	Universität Hohenheim	de
local.faculty.number	3	de
local.institute.number	520	de
local.opus.number	1937
local.series.issueNumber	2021,06
local.series.title	Hohenheim discussion papers in business, economics and social sciences
local.university	Universität Hohenheim	de
local.university.faculty	Faculty of Business, Economics and Social Sciences	en
local.university.faculty	Fakultät Wirtschafts- und Sozialwissenschaften	de
local.university.institute	Institute for Economics	en
local.university.institute	Institut für Volkswirtschaftslehre	de

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