Industrial Policy in the Presence of Wage Distortions: The Case of the U.S. Auto and Steel Industries
AbstractThis paper examines the welfare effects of protection in two high wage premia sectors--autos and steel--to determine if protection is justified to correct for the labor misallocation due to the wage premia. If wage premia are exogenous, under most product market structures, labor misallocation is too small to justify protection. More importantly, due to union influence in autos and steel, the wage premium is endogenous. Then wage premia may even exacerbate the welfare costs of protection. With increasing returns to scale and firm entry, optimal policies may be reversed, so further caution must be exercised. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 34 (1993)
Issue (Month): 4 (November)
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Other versions of this item:
- de Melo, Jaime & Tarr, David, 1990. "Industrial Policy in the Presence of Wage Distortion: The Case of the US Auto and Steel Industries," CEPR Discussion Papers 435, C.E.P.R. Discussion Papers.
- Melo, J. de & Tarr, D., 1993. "Industrial Policy in the Presence of Wage Distorsions: The Case of the US Auto and Steel Industries," Research Papers by the Department of Economics, University of Geneva 93.17, Département des Sciences Économiques, Université de Genève.
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- de Melo, Jaime & Tarr, David, 1996.
"VERs under imperfect competition and foreign direct investment: A case study of the US-Japan auto VER,"
Japan and the World Economy,
Elsevier, vol. 8(1), pages 11-33, March.
- de Melo, J. & Tarr, D., 1994. "VERs Under Imperfect Competition and Foreing Direct Investment: A Case study of the US-Japan Auto VER," Research Papers by the Department of Economics, University of Geneva 94.09, Département des Sciences Économiques, Université de Genève.
- de Melo, Jaime & Tarr, David, 1995. "VERs Under Imperfect Competition and Foreign Direct Investment: A Case Study of the US-Japan Auto VER," CEPR Discussion Papers 1173, C.E.P.R. Discussion Papers.
- de Melo, Jaime & Tarr, David, 1991. "VERs under imperfect competition and foreign direct investment : a case study of the U.S. - Japan auto VER," Policy Research Working Paper Series 667, The World Bank.
- de Melo, Jaime & Grether, Jean-Marie & Olarreaga, Marcelo, 1999.
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- Phillip Swagel, 1993.
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- Phillip Swagel, 1996. "Union Behavior, Industry Rents, and Optimal Policies," IMF Working Papers 96/143, International Monetary Fund.
- Rutherford, Thomas F. & Tarr, David G., 2002. "Trade liberalization, product variety and growth in a small open economy: a quantitative assessment," Journal of International Economics, Elsevier, vol. 56(2), pages 247-272, March.
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- Morris Morkre & David Tarr, 1995. "Reforming Hungarian agricultural trade policy: A quantitative evaluation," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 131(1), pages 106-131, March.
- Michelle P. Connolly & Diego Valderrama, 2005. "North-South technological diffusion and dynamic gains from trade," Working Papers in Applied Economic Theory 2004-24, Federal Reserve Bank of San Francisco.
- Jensen, Jesper & Tarr, David, 2002. "Trade, foreign exchange, and energy policies in the Islamic Republic of Iran : reform agenda, economic implications, and impact on the poor," Policy Research Working Paper Series 2768, The World Bank.
- Madani, Dorsati & Olarreaga, Marcelo, 2002. "Politically optimal tariffs : an application to Egypt," Policy Research Working Paper Series 2882, The World Bank.
- Rutherford, Thomas F. & Tarr, David G., 1998. "Trade liberalization and endogenous growth in a small open economy : a quantitative assessment," Policy Research Working Paper Series 1970, The World Bank.
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