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The Economics of Content Protection

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  • Michael L. Mussa
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    Abstract

    In a model that allows smooth substitution between domestic and imported inputs, content protection distorts inout choice but does not force a divergence between price and unit production cost. Content protection biases gains intechnical efficiency away from those saving domestic input and toward those saving imported input. By increasing derived demand for the domestic input,a marginally effective content requirement benefits suppliers of this input. Increases in the content requirement above the marginally effective level increase such benefits to suppliers of the domestic input provided that the price elasticity of demand for the final product is less than a critical value. The consequences of content protection are not materially affected by monopoly in the domestic final product market or monopsony in the domestic input market unless such monopoly or monopsony are created by content protection. The situation of a monopolistic supplier of the domestic input is enhanced by content protection.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1457.

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    Date of creation: Sep 1984
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    Publication status: published as Salvatore, Dominick (ed.) Protectionism and world welfare. Cambridge; New York and Melbourne: Cambridge University Press, 1993.
    Handle: RePEc:nbr:nberwo:1457

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    References

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    1. Mussa, Michael, 1974. "Tariffs and the Distribution of Income: The Importance of Factor Specificity, Substitutability, and Intensity in the Short and Long Run," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1191-1203, Nov.-Dec..
    2. Grossman, Gene M, 1981. "The Theory of Domestic Content Protection and Content Preference," The Quarterly Journal of Economics, MIT Press, vol. 96(4), pages 583-603, November.
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    Cited by:
    1. Productivity Commission, 2004. "Rules of Origin under the Australia–New Zealand CER Trade Agreement," International Trade 0410001, EconWPA.
    2. Ju, Jiandong & Krishna, Kala, 2002. "Regulations, regime switches and non-monotonicity when non-compliance is an option: an application to content protection and preference," Economics Letters, Elsevier, vol. 77(3), pages 315-321, November.
    3. Takacs, Wendy E., 1991. "The high cost of protecting Uruguay's automotive industry," Policy Research Working Paper Series 639, The World Bank.
    4. Takacs, Wendy E., 1992. "How import protection affects the Philippines'motor vehicle industry," Policy Research Working Paper Series 1035, The World Bank.
    5. Safadi, Raed & Laird, Sam, 1996. "The Uruguay Round agreements: Impact on developing countries," World Development, Elsevier, vol. 24(7), pages 1223-1242, July.
    6. Jie-A-Joen,Clive & Belderbos,René & Sleuwaegen,Leo, 1998. "Local content requirements, vertical cooperation, and foreign direct investment," Research Memorandum 001, Maastricht University, Netherlands Institute of Business Organization and Strategy Research (NIBOR).
    7. Beghin, John C. & Brown, A. Blake & Zaini, M. Hasyim, 1997. "Impact of domestic content requirement on the US tobacco and cigarette industries," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 15(3), January.
    8. Bekkali, Mukhtar & Beghin, John C., 2005. "Economics of Domestic Cultural Content Protection in Broadcasting, The," Staff General Research Papers 12476, Iowa State University, Department of Economics.
    9. Kala Krishna, 2005. "Conditional Policies in General Equilibrium," NBER Working Papers 11283, National Bureau of Economic Research, Inc.
    10. Kala Krishna & Anne Krueger, 1995. "Implementing Free Trade Areas: Rules of Origin and Hidden Protection," NBER Working Papers 4983, National Bureau of Economic Research, Inc.
    11. Rod Falvey & Geoff Reed,, . "Economic Effects of Rules of Origin," Discussion Papers 97/21, University of Nottingham, CREDIT.

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