The Optimal Dynamic Infant Industry Protection in Joining a Free Trade Agreement: A Numerical Analysis of the Vietnamese Motorcycle Industry
AbstractThis paper investigates the optimal dynamic paths of trade protection imposed on infant industries during the process of joining a free trade agreement. The framework is based on the dynamic learning-by-doing model developed in Melitz (2005), where industries are experiencing dynamic externalities. In this framework, restricted-time protection is introduced as a realistic approach to correspond to the conditions of actual agreements. According to the computational analysis, in some feasible cases of optimal tariff paths may not follow a downward trend, as conventional wisdom would suggest. The results of the numerical simulation applied to the Vietnamese motorcycle industry support these findings.
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Bibliographic InfoPaper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd11-191.
Date of creation: May 2011
Date of revision:
dynamic externality; infant industry protection; numerical analysis; Vietnam;
Find related papers by JEL classification:
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
- L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment
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