Osaka Workshop on Economics of Institutions and Organization (#150)

This study deals with the issue of red-tape barriers (RTBs), which is recently discussed by the OECD and WTO, using a simple oligopolistic trade model. Taking not only the tariff rate decisions but also RTBs decisions into account, we obtain the following results: (i) Under a free trade agreement (FTA), governments have an incentive for RTBs when the number of foreign firms is relatively small, but the incentive decreases as the number of foreign firms increases. These results suggest that when concluding an FTA, if incentives for RTBs are not taken into consideration at the same time, welfare may rather deteriorate, and further it is necessary to pay attention to domestic and international competitive levels. Abstract：Kentaro Inomata