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INFANT INDUSTRY TARIFF PROTECTION WITH PRESSURE GROUPS
(Click above to download a pdf copy of the paper)
- Abstract: This paper analyzes the increasing tariff protection in the
Spanish iron and steel industry over the first third of the 20th century.
Learning effects are explicitly included to model a dynamic game of trade
liberalization. The government chooses the tariff level while firms decide
how much to produce each period. Firm's production decisions determine their
future cost levels. Assuming that learning reduces only fixed costs, the
dynamic game may be solved in closed form, so that the optimality and time
consistency of the actual policy can be evaluated. Furthermore, the model is
used to measure the relative importance of producers and consumers on the
government's equilibrium tariff strategy. The model is calibrated for year
1913 and it is shown that the existence of important, unexploited, dynamic
economies of scale may have justified high tariff levels at that time. In
addition the results also show that the Spanish iron and steel producers
behaved more competitively than what is commonly assumed, and that the
government's protection policy was not significantly conditioned by steel
producers.
- Publication: International Journal of Industrial Organization, 16, 749-784, November 1998.
- JEL: C73, F12, L61.
- First version: November 1994.
- Final version: May 1997.
- Funding: None.
- Seminars: Fundación Ramón Areces and Ministerio de Educación y Ciencia,
Spain.
- Conferences: XIII Latin American Meeting of the
Econometric Society, Caracas 1994; and the 1st Conference on Empirical
Investigations in International Trade, Purdue University, 1994.
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