The Competitive Impact of International Trade: The Case of Import Liberalization of the Japanese Oil Product Market

Sadao Nagaoka, Fukunari Kimura

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

This paper analyzes the competitive impact of the recent import liberalization of the Japanese oil product market. In response to the import liberalization in March 1996, not only did the market price of gasoline decline sharply but also its domestic production kept rising and did not decline relative to imports. Moreover, its price fell substantially before the actual liberalization of the import. This paper demonstrates both theoretically and empirically that the theory of implicit cartel can explain such features of the impact of import liberalization very well. The paper also identifies the significantly positive welfare impact of such liberalization due to the expansion of supply in a market with a large tax wedge between price and cost and, possibly more importantly, due to the transformation of competitive conduct from unproductive investment for cartel-rent shifting into price cuts. J. Japan. Int. Econ., December 1999, 13(4), pp. 397-423. Hitotsubashi University; and Keio University. Copyright 1999 Academic Press. Journal of Economic Literature Classification Numbers: L40, F12, K21.

Original languageEnglish
Pages (from-to)397-423
Number of pages27
JournalJournal of The Japanese and International Economies
Volume13
Issue number4
DOIs
Publication statusPublished - 1999 Dec 1
Externally publishedYes

Keywords

  • Implicit cartel
  • Import liberalization
  • Rent dissipation

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

Fingerprint Dive into the research topics of 'The Competitive Impact of International Trade: The Case of Import Liberalization of the Japanese Oil Product Market'. Together they form a unique fingerprint.

  • Cite this