Imperfect Competition and Trade Policies

Abstract

This paper surveys the recent developments on trade policy under imperfect competition. It is shown that in an imperfectly competitive industry trade policy may be an effective tool to divert rents towards domestic firms and consumers. The robustness of the results to the specification of the oligopoly and the rest of the economy is also reviewed. Small changes in the assumptions about the characteristics of the industry can change drastically the policy implications. Some empirical evidence to measure the effects of trade policy in oligopolistic industries are also presented. Finally there is a discussion about the relevance of these new developments as policy guidelines.