Show simple item record Jang, Yong Joon Alexeev, Michael 2012-04-02T16:56:32Z 2012-04-02T16:56:32Z 2010
dc.identifier.citation Alexeev, Michael V. and Yong Joon Jang. Trade liberalization, heterogeneous firms and the soft budget constraint. Journal of Comparative Economics 38 (2010) 449-460. en
dc.description.abstract We analyze the interaction between the soft budget constraint (SBC) and international trade by placing Segal’s (1998) SBC model within Melitz’s (2003) framework of international trade with heterogeneous monopolistically competitive firms. As in Segal’s model, SBC may result in moral hazard. The opening to international trade adds another sort of inefficiency. Some firms that would have become exporters in the absence of SBC choose to apply low effort and not export in order to extract a subsidy from the government. This effect takes place when the trade costs are sufficiently low. Overall, however, trade liberalization reduces inefficiencies generated by SBC. The number of firms subject to moral hazard SBC decreases, aggregate effort level increases and aggregate profits lost due to SBC-induced sub-optimal effort decline as trade costs decrease. en
dc.language.iso en_US en
dc.publisher Elsevier en
dc.relation.isversionof en
dc.rights Copyright © 2010 Association for Comparative Economic Studies en
dc.subject monopolistic competition en
dc.subject heterogeneous firms en
dc.subject international trade en
dc.subject Soft budget constraint en
dc.title Trade Liberalization, Heterogeneous Firms and the Soft Budget Constraint en
dc.type Article en

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