TRADE POLICIES, IMPERFECT COMPETITION, AND ENDOGENOUS GROWTH

This paper analyses the effects of trade policies in a general equilib rium two-country model with imperfect competition. This model generali zes the models of monopolistic and Cournot competition. Trade is shown to be welfare-increasing in the monopolistic competition model. The s ame holds true in the case of endogenous growth. In the model of Courn ot competition, the welfare effects of trade policies depend upon the type of entry and exit. Indeed, it is possible for two countries to in crease their welfare by pursuing a coordinated policy of protection. I n an endogenous growth setting, the validity of the latter finding dep ends upon the consumer rate of time preference.