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Pré-Publication, Document De Travail Année : 2014

Bailout policy in a globalized economy

Résumé

This paper explores how trade integration influences the decision by national governments to bailout manufacturing firms. We develop a 2-country model of generalized oligopoly with heterogenous firms and trade costs. High-cost firms are eligible for a bailout while low-cost firms are profitable. Our results show that trade liberalization influences both political benefits of a bailout and its relative cost as compared to a laissez-faire policy. If the fall in trade cost is so large that it allows high-cost firms to become exporters, governments might move away from a bailout policy to a laissez-faire policy. In contrast, a marginal decline in trade costs that does not affect the export status of high-cost firms, always makes governments more prone to adopt a bailout decision.
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Dates et versions

halshs-00925006 , version 1 (07-01-2014)

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  • HAL Id : halshs-00925006 , version 1

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Nelly Exbrayat, Thierry Madiès, Stéphane Riou. Bailout policy in a globalized economy. 2014. ⟨halshs-00925006⟩
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