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Industrial Organization and Trade Liberalization: Evidence from Korea

In: Empirical Studies of Commercial Policy

  • Jaime de Melo
  • David Roland-Holst

Based on evidence about industrial organization and market structure, this paper develops a CGE model with increasing returns to scale (IRTS) in selected industrial sectors in order to estimate the welfare gains Korea would achieve from abolishing the import restraints (tariffs and equivalent measures) prevailing in 1982. Under constant returns (CRTS) across the board, welfare gains are estimated at 1% of GDP. With IRTS in three industrial sectors, welfare gain estimates range from -0.5% to 10% of 1982 GDP, depending on the assumptions concerning price setting behavior and profit levels that existed under protecti.

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This chapter was published in:
  • Robert E. Baldwin, 1991. "Empirical Studies of Commercial Policy," NBER Books, National Bureau of Economic Research, Inc, number bald91-1, September.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 6718.
    Handle: RePEc:nbr:nberch:6718
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    1. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-22, February.
    2. Snape, Richard H, 1977. "Trade Policy in the Presence of Economies of Scale and Product Variety," The Economic Record, The Economic Society of Australia, vol. 53(144), pages 525-34, December.
    3. Shantayanan Devarajan & Dani Rodrik, 1989. "Pro-Competitive Effects of Trade Reform: Results from a CGE Model of Cameroon," NBER Working Papers 3176, National Bureau of Economic Research, Inc.
    4. Richard Harris, 1983. "Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition," Working Papers 524, Queen's University, Department of Economics.
    5. J. David Richardson & Robert S. Strauss & Michihiko Kunihiro & Edmund T. Pratt, Jr, 1988. "Trade Policy," NBER Chapters, in: International Economic Cooperation, pages 167-232 National Bureau of Economic Research, Inc.
    6. Richard G. Harris, 1989. "The New Protectionism Revisited," Canadian Journal of Economics, Canadian Economics Association, vol. 22(4), pages 751-78, November.
    7. Condon, Timothy & de Melo, Jaime, 1990. "Industrial organization implications of QR trade regimes : evidence and welfare costs," Policy Research Working Paper Series 487, The World Bank.
    8. Devarajan, Shantayanan & Rodrik, Dani, 1989. "Trade Liberalization in Developing Countries: Do Imperfect Competition and Scale Economies Matter?," American Economic Review, American Economic Association, vol. 79(2), pages 283-87, May.
    9. Horstmann, Ignatius J. & Markusen, James R., 1986. "Up the average cost curve: Inefficient entry and the new protectionism," Journal of International Economics, Elsevier, vol. 20(3-4), pages 225-247, May.
    10. Don, H. & Gunasekera, B. H. & Tyers, Rod, 1990. "Imperfect competition and returns to scale in a newly industrialising economy : A general equilibrium analysis of Korean trade policy," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 223-247, November.
    11. Venables, Anthony J., 1985. "Trade and trade policy with imperfect competition: The case of identical products and free entry," Journal of International Economics, Elsevier, vol. 19(1-2), pages 1-19, August.
    12. Smith, Alasdair & Venables, Anthony J, 1988. "Completing the Internal Market in the European Community: Some Industry Simulations," CEPR Discussion Papers 233, C.E.P.R. Discussion Papers.
    13. Joel Bergsman, 1974. "Commercial Policy, Allocative Efficiency, and "X-Efficiency"," The Quarterly Journal of Economics, Oxford University Press, vol. 88(3), pages 409-433.
    14. Brown, D.K. & Stern, R.M., 1988. "U.S.-Canada Bilateral Tariff Elimination: The Role Of Product Differentiation And Market Structure," Working Papers 227, Research Seminar in International Economics, University of Michigan.
    15. Shapiro, Carl, 1989. "Theories of oligopoly behavior," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 6, pages 329-414 Elsevier.
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