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Trade and Efficiency Effects of Domestic Content Protection: The Australian Tobacco and Cigarette Industries

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  • Beghin, John C
  • Lovell, C A Knox

Abstract

This paper provides an empirical investigation into the international trade and domestic market efficiency effects of physical domestic content requirements in the Australian tobacco leaf growing and cigarette manufacturing industries. The authors' empirical evidence suggests that the content requirement has distorted trade by restricting leaf imports. Nevertheless, the data are also consistent with the efficient contract hypothesis. The mix of domestic to imported leaf used in cigarette manufacturing depends on domestic leaf production costs and on world leaf prices but not on the negotiated domestic leaf price. Copyright 1993 by MIT Press.

Suggested Citation

  • Beghin, John C & Lovell, C A Knox, 1993. "Trade and Efficiency Effects of Domestic Content Protection: The Australian Tobacco and Cigarette Industries," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 623-631, November.
    • Handle: RePEc:tpr:restat:v:75:y:1993:i:4:p:623-31
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    References listed on IDEAS

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    1. Michael L. Mussa, 1984. "The Economics of Content Protection," NBER Working Papers 1457, National Bureau of Economic Research, Inc.
    2. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April.
    3. Beghin, John C. & Sumner, Daniel A., 1990. "Content Requirements with Bilateral Monopoly," Department of Economics and Business - Archive 259453, North Carolina State University, Department of Economics.
    4. Thomson, William, 1987. "Monotonicity of bargaining solutions with respect to the disagreement point," Journal of Economic Theory, Elsevier, vol. 42(1), pages 50-58, June.
    5. Gene M. Grossman, 1981. "The Theory of Domestic Content Protection and Content Preference," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 96(4), pages 583-603.
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    Cited by:

    1. Jie-A-Joen, C. & Belderbos, R.A. & Sleuwaegen, L., 1998. "Local content requirements, vertical cooperation, and foreign direct investment," Research Memorandum 001, Maastricht University, Netherlands Institute of Business Organization and Strategy Research (NIBOR).
    2. Beghin, John C. & Blake Brown, A. & Hasyim Zaini, M., 1997. "Impact of domestic content requirement on the US tobacco and cigarette industries," Agricultural Economics, Blackwell, vol. 15(3), pages 201-212, January.
    3. 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.

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