Warranted Skepticism: A Dynamic Model of Infant Industry Protection
AbstractThe neo-classical model of infant industry protection is limited in that agents have static expectations. This paper incorporates a fundamental behavioral assumption, that agents base their decisions on future expectations. An analysis of the global perfect foresight dynamics exposes the rich relationship between protection and outcome, and new policy implications. If an industry is to be protected until its good is competitive in the world market, its success is as likely as its failure, explaining the unreliability of protection programs in practice. The industry's decline after an initial take-off can also be an equilibrium. For the industry's growth to be an equilibrium, protection can be removed before the industry achieves international competitiveness. For the industry's growth to be the unique equilibrium, protection has to continue even after international competitiveness.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1668.
Date of creation: 01 Aug 2000
Date of revision:
Contact details of provider:
Phone: 1 212 998 3820
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Matsuyama, Kiminori, 1992. "The market size, entrepreneurship, and the big push," Journal of the Japanese and International Economies, Elsevier, vol. 6(4), pages 347-364, December.
- Tornell, Aaron, 1991. "Time Inconsistency of Protectionist Programs," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 963-74, August.
- Matsuyama, Kiminori, 1991.
"Increasing Returns, Industrialization, and Indeterminacy of Equilibrium,"
The Quarterly Journal of Economics,
MIT Press, vol. 106(2), pages 617-50, May.
- Kiminori Matsuyama, 1990. "Increasing Returns, Industrialization and Indeterminacy of Equilibrium," Discussion Papers 878, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Rodrik, Rani, 1995. "Trade and industrial policy reform," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 45, pages 2925-2982 Elsevier.
- Kaneda Mitsuhiro, 1995. "Industrialization under Perfect Foresight: A World Economy with a Continuum of Countries," Journal of Economic Theory, Elsevier, vol. 66(2), pages 437-462, August.
- Krueger, Anne O & Tuncer, Baran, 1982. "An Empirical Test of the Infant Industry Argument," American Economic Review, American Economic Association, vol. 72(5), pages 1142-52, December.
- Krueger, Anne O., 1984. "Trade policies in developing countries," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 11, pages 519-569 Elsevier.
- Panagariya, Arvind, 1986. "Increasing returns, dynamic stability, and international trade," Journal of International Economics, Elsevier, vol. 20(1-2), pages 43-63, February.
- Harrison, Ann E, 1994. "An Empirical Test of the Infant Industry Argument: Comment," American Economic Review, American Economic Association, vol. 84(4), pages 1090-95, September.
- Ethier, Wilfred J, 1982. "Decreasing Costs in International Trade and Frank Graham's Argument for Protection," Econometrica, Econometric Society, vol. 50(5), pages 1243-68, September.
- Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May.
- Bell, Martin & Ross-Larson, Bruce & Westphal, Larry E., 1984. "Assessing the performance of infant industries," Journal of Development Economics, Elsevier, vol. 16(1-2), pages 101-128.
- Helpman, Elhanan, 1984. "Increasing returns, imperfect markets, and trade theory," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 7, pages 325-365 Elsevier.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).
If references are entirely missing, you can add them using this form.