Working Paper: CEPR ID: DP1565
Authors: Wilfried Pauwels; Hylke Vandenbussche; Marcel Weverbergh
Abstract: This paper analyses how European anti-dumping policy under imperfect competition affects firm behaviour and domestic welfare. Our theoretical model is the first to complement the European empirical literature on anti-dumping policy (see Messerlin (1989), Hindley (1988), Tharakan and Waelbroeck (1994)), and can usefully be compared with recent papers dealing with the effects of US anti-dumping policy (Reitzes (1993), Fischer (1992), Prusa (1994)). We use a two-period Cournot duopoly model with a European and a foreign firm that differ in costs and products. European anti-dumping policy differs from its US counterpart mainly in terms of injury margin calculation and the derivation of the anti-dumping duty. European anti-dumping rules provide the home firm with incentives to either induce or to feign injury. Our results indicate that when the level of protection is endogenous, the strategic trade policy argument for protection need not apply. Our findings also suggest that US anti-dumping rules perform better than European rules in terms of welfare and in terms of protecting domestic value added and employment.
Keywords: antidumping; imperfect competition; two-period Cournot oligopoly
JEL Codes: C72; F13; K2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Antidumping duties (F18) | firm behavior (D21) |
| firm behavior (D21) | antidumping duties (F18) |
| Antidumping duties (F18) | domestic welfare (I38) |
| US antidumping rules (F18) | domestic welfare (I38) |
| Strategic behavior in first period (C72) | welfare effects of antidumping duties in second period (F18) |