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The Failure of Strategic Industrial Policies Due to the Manipulation by Firms

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  • Karp, Larry
  • Perloff, Jeffrey M

Abstract

The strategic effects of subsidies on output and subsidies on investment differ substantially in dynamic models where a government's commitment ability is limited. Output subsidies remain effective even as the period of commitment vanishes, but investment subsidies may become completely ineffective. This difference has been obscured because most existing models of strategic trade policy are static.

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Bibliographic Info

Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt2tf2n8fq.

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Date of creation: 01 Sep 1993
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Handle: RePEc:cdl:agrebk:qt2tf2n8fq

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Related research

Keywords: Strategic trade policy; convex adjustment costs; Markov perfect equilibria;

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  1. Ando, Albert & Auerbach, Alan J., 1988. "The cost of capital in the United States and Japan: A comparison," Journal of the Japanese and International Economies, Elsevier, vol. 2(2), pages 134-158, June.
  2. Gruenspecht, Howard K., 1988. "Export subsidies for differentiated products," Journal of International Economics, Elsevier, vol. 24(3-4), pages 331-344, May.
  3. Neary, J Peter, 1989. "Export Subsidies and Price Competition," CEPR Discussion Papers 327, C.E.P.R. Discussion Papers.
  4. Robert N. McCauley & Steven A. Zimmer, 1989. "Explaining international differences in the cost of capital," Quarterly Review, Federal Reserve Bank of New York, issue Sum, pages 7-28.
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