Scandinavian Working Papers in Economics

Working Papers,
University of Aarhus, Aarhus School of Business, Department of Economics

No 08-24: Anti-Dumping with Heterogeneous Firms: New Protectionism for the New-New Trade Theory

Christian Gormsen ()
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Christian Gormsen: Department of Economics, Aarhus School of Business, Postal: Frichshuset Hermodsvej 22, 8230 Åbyhøj , Denmark

Abstract: This paper analyzes anti-dumping (AD) policies in a two-country model with heterogeneous firms in monopolistic competition. Effective AD legislation in one country imposes a no-dumping condition on firms exporting from the other country, altering their pricing both domestically and abroad. Some firms with intermediate productivities cease export activity, and entry shifts towards the AD protected country, which has now become relatively more attractive. Protecting firms with AD therefore increases the number of firms entering and eventually increases competition, and the consumers enjoy welfare gains. In the country without AD legislation, there is a welfare loss due to fewer entrants.

Keywords: Trade policy; Anti-dumping; Monopolistic competition; Heterogeneous firms

JEL-codes: F12; F13

32 pages, November 1, 2008

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