Industrial policy under monopolistic competition

Harry Flam*, Elhanan Helpman

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


We study the general equilibrium effects of tariffs, export subsidies, output subsidies and RD subsidies in a monopolistically competitive sector that produces differentiated products. Apart from allocative effects we examine the desirability of these policies from a welfare point of view. It is shown that a small tariff is welfare improving, but that the other instruments result in ambiguous welfare changes. The results depend on identifiable details of the production structure, the sectoral interlinkages through factor markets and preferences. These results are compared to other findings in the literature.

Original languageEnglish
Pages (from-to)79-102
Number of pages24
JournalJournal of International Economics
Issue number1-2
StatePublished - Feb 1987


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