Strategic policy and international economic integration

  1. Moner Colonques, Rafael
  2. Sempere Monerris, José Jorge
  3. Urbano Salvador, Amparo
Journal:
Working papers = Documentos de trabajo: Serie AD

Year of publication: 1999

Issue: 5

Type: Working paper

Abstract

In a context of economic integration, we analyse the strategic effect of wo policies: merger policy and state aid policy. When governments play a Stackelberg policy game before firms compete in the market we find that: a) only under certain conditions, the leader country chooses a merger policy and, b) there is a policy equivalence in welfare terms for the follower. A centralised policy decision is welfare improving relative to the strategic policy game and equals total welfare of the area under autarky. Besides, there always exists a social incentive to propose mergers and both, the state aid level and the state aid expenditure, are lower.