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- Title
A Theory of Managed Trade.
- Authors
Bagwell, Kyle; Staiger, Robert W.
- Abstract
This paper proposes a theory that predicts low levels of protection during periods of "normal" trade volume coupled with episodes of "special'' protection when trade volumes surge. This dynamic pattern of protection emerges from a model in which countries choose levels of protection in a repeated game facing volatile trade swings. High trade volume leads to a greater incentive to defect unilaterally from cooperative tariff levels. Therefore, as the volume of trade expands, the level of protection must rise in a cooperative equilibrium to mitigate the rising trade volume and hold the incentive to defect in check.
- Subjects
TERMS of trade; MARKET volatility; TARIFF; COMMERCIAL policy; ECONOMIC policy
- Publication
American Economic Review, 1990, Vol 80, Issue 4, p779
- ISSN
0002-8282
- Publication type
Article