Trade policy with risky investment in quality

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


Consider a new export market in which firms can invest in quality but may fail to achieve quality. Quality of the export good, then, varies across firms, having endogenous (whether to invest) and exogenous (determined by nature) aspects. Previous works suggest that the market outcome and socially optimal policy depend on whether quality is exogenous or endogenous. It is shown that the previous differences are driven by the demand and cost parameterizations, not by the endogeneity of quality. Previous works also suggest subsidies to raise welfare. Subsidies are found to lower welfare while a tax may raise welfare. JEL Classification: F13, D82, D83.

Original languageEnglish
Pages (from-to)39-54
Number of pages16
JournalCanadian Journal of Economics
Issue number1
StatePublished - 1999

ASJC Scopus subject areas

  • Economics and Econometrics


Dive into the research topics of 'Trade policy with risky investment in quality'. Together they form a unique fingerprint.

Cite this