General Equilibrium Assessment of Trade Liberalization Effects under Cournot Oligopoly Market Structures: The Case of Tunisia

In this paper we simulate the impact of removing all tariffs on imports under both competitive and Cournot oligopoly market structures with and without barriers to entry and exit. We find that trade liberalization induces welfare gains equal to 1 percent with perfect competition and 0.9 percent with...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Author Chatti, Rim
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2000
Subjects
Trade liberalization
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Summary:In this paper we simulate the impact of removing all tariffs on imports under both competitive and Cournot oligopoly market structures with and without barriers to entry and exit. We find that trade liberalization induces welfare gains equal to 1 percent with perfect competition and 0.9 percent with increasing returns to scale, oligopoly and barriers to entry and exit, but welfare losses equal to 0.4 percent with free entry and exit. Sensitivity analysis shows that welfare losses depend on elasticities of substitution between imported and domestic goods and cost disadvantage ratios.