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Industrial Organization Implications of QR Trade Regimes: Evidence and Welfare Costs

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  • Condon, Timothy
  • de Melo, Jaime

Abstract

Evidence of the relationship between trade regimes, concentration and profitability in semi-industrial countries' manufacturing sectors is reviewed. This evidence is used to justify the formulation and simulation of a three sector general equilibrium model in which the manufacturing sector's behavior is linked to the degree of restrictiveness of the QR regime. Simulations are conducted with several variants of the model to ascertain separately the effects of introducing economies of scale, firm entry/exit, departures from competitive pricing, and interactions between entry and pricing rules. Numerical results suggest that a 20 percent rationing rate of intermediates and consumption goods can have welfare costs of about 2.0 percent of national income in the absence of economies of scale and industrial organization interactions with the trade regime. When industrial organization features are included, the costs of the same 20 percent rationing quadruples.

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Bibliographic Info

Article provided by Springer in its journal Empirical Economics.

Volume (Year): 16 (1991)
Issue (Month): 1 ()
Pages: 139-53

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Handle: RePEc:spr:empeco:v:16:y:1991:i:1:p:139-53

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  1. de Melo, Jaime & Urata, Shujiro, 1986. "The influence of increased foreign competition on industrial concentration and profitability," International Journal of Industrial Organization, Elsevier, vol. 4(3), pages 287-304, September.
  2. Clarke, Roger & Davies, Stephen & Waterson, Michael, 1984. "The Profitability-Concentration Relation: Market Power or Efficiency?," Journal of Industrial Economics, Wiley Blackwell, vol. 32(4), pages 435-50, June.
  3. Shantayanan Devarajan & Dani Rodrik, 1989. "Pro-Competitive Effects of Trade Reform: Results from a CGE Model of Cameroon," NBER Working Papers 3176, National Bureau of Economic Research, Inc.
  4. de Melo, Jaime & Roland-Holst, David, 1990. "Industrial organization and trade liberalization : evidence from Korea," Policy Research Working Paper Series 518, The World Bank.
  5. Jere H. Behrman, 1976. "Foreign Trade Regimes and Economic Development: Chile," NBER Books, National Bureau of Economic Research, Inc, number behr76-1, July.
  6. Cox, David & Harris, Richard, 1985. "Trade Liberalization and Industrial Organization: Some Estimates for Canada," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 115-45, February.
  7. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
  8. Horstmann, Ignatius J. & Markusen, James R., 1986. "Up the average cost curve: Inefficient entry and the new protectionism," Journal of International Economics, Elsevier, vol. 20(3-4), pages 225-247, May.
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Cited by:
  1. Jaime de Melo & David Roland-Holst, 1991. "Industrial Organization and Trade Liberalization: Evidence from Korea," NBER Chapters, in: Empirical Studies of Commercial Policy, pages 287-310 National Bureau of Economic Research, Inc.
  2. Roberts, Mark J. & Tybout, James R., 1991. "Size rationalization and trade exposure in developing countries," Policy Research Working Paper Series 594, The World Bank.
  3. De Melo, Jaime, 1988. "CGE models for the analysis of trade policy in developing countries," Policy Research Working Paper Series 3, The World Bank.
  4. Dani Rodrik, 1988. "Closing the Technology Gap: Does Trade Liberalization Really Help?," NBER Working Papers 2654, National Bureau of Economic Research, Inc.

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