DP360 | The Market for Cars in the Enlarged European Community

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01/12/1989

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Abstract

This paper analyzes the effects of European Community trade policy towards the car market, in a formal model in which the motor industry is treated as an imperfectly competitive industry with economies of scale in production. Voluntary restrictions on exports of Japanese cars to Community markets are modeled as having an anti-competitive effect. The model is numerically calibrated to 1988 data and a range of policy changes are simulated, including the entry of Spain and Portugal into the Community, and the reduction of border barriers and fiscal harmonization associated with the Community's 1992 program. The main focus is on the effects of changes in the Community's external trade policy.