| This paper analyzes antidumping (AD) policies in a two-
country model with heterogeneous firms. One country
enforces AD so harshly that firms exporting to the country
choose not to dump. In the short run, the country enforcing
AD experiences reduced competition to the benefit of local
firm and detriment of local consumers, but in the long run AD
protection attracts new firms, increasing competition and
consumer welfare. In the country’s trading partner,
competition initially increases: Some firms give up exporting,
but those that remain will lower their domestic prices.
Consumers therefore benefit in the short run. In the long run,
however, fewer firms will enter the unprotected country, and
competition will eventually decrease, resulting in welfare
losses. |
Abstract
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