Working Paper: CEPR ID: DP5480
Authors: Joseph Francois; Henrik Horn
Abstract: We examine antitrust rules in a two-county general equilibrium trade model, contrasting national and multilateral (cooperative) determination of competition policy, exploring the properties of the policy equilibrium. It is not imperfect competition, but variation in competitive stance between sectors that matters for trading partners. Beggar-thy-neighbor competition policies relate to countries' comparative advantages, and hurt the factor intensively used, or specific to, the imperfectly competitive sector. They also create a competitive advantage for export firms. FDI can be pro-competitive in this context, reducing the scope for beggar-thy-neighbor policies and reducing the gains from a multilateral competition agreement.
Keywords: antitrust policy; competition policy; FDI; merger policy; trade; imperfect competition
JEL Codes: F12; F3; L4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| variations in competitive stance across sectors (L19) | trade patterns (F10) |
| beggar-thy-neighbor competition policy (L49) | adverse outcomes for countries reliant on factor-intensive sectors (F69) |
| FDI (F23) | pro-competitive role (L49) |
| FDI (F23) | diminish the scope for harmful policies (F68) |
| absence of an international antitrust agreement (L49) | suboptimal welfare outcomes (D69) |
| divergent competition policies (L49) | harm global trade (F69) |
| competition policies (L49) | impact overall welfare (I30) |
| competition policies (L49) | influence on income distribution among factor owners (D33) |