Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2002:15: Trade Protection and the Location of Production

Susanna Thede
Additional contact information
Susanna Thede: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: This study examines the economic role of trade protection in a new economic geography model where countries have no inherent differences in endowments, preferences or technologies. This is done in two ways. First, the effects of agricultural and manufacturing protection on the set of equilibria are obtained. Second, the endogenous trade policy positions resulting from a game between national welfare-maximising governments are identified. The model used is a Krugman & Venables (1995) model modified to incorporating agricultural trade costs. Therefore, an additional contribution is the examination of the effect of agricultural trade costs on the equilibrium structure of the model.

Keywords: new economic geography; endogenous trade policies; agricultural trade costs

JEL-codes: F12; F13

49 pages, May 27, 2002

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