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Kala Krishna, Suddhasatwa Roy, Marie C. Thursby
NBER Working Paper No. 7624*
Issued in March 2000
NBER Program(s): ITI
---- Abstract -----
In contrast to recent literature, we show that market access requirements (MARs) can be implemented in a procompetitive manner even in the absence of threats in related markets. By focusing on subsidies that are paid only when the requirement is met, we show that a MAR can increase aggregate output relative to free trade provided that the right set of firms is targeted. In the context of a model with multiple Japanese and US firms, we show that a MAR on US imports is procompetitive as long as the US firms are the ones targeted to receive the subsidy.
*Published: Canadian Journal of Economics, forthcoming.
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