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Industrial Organization Implications of QR Trade Regimes: Evidence and Welfare Costs

In: Modeling Developing Countries' Policies in General Equilibrium

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  • T. Condon
  • J. de Melo

Abstract

Evidence of the relationship between trade regimes, concentration and profitability in semi-industrial countries' manufacturing sectors is reviewed. This evidence is used to justify the formulation and simulation of a three sector general equilibrium model in which the manufacturing sector's behavior is linked to the degree of restrictiveness of the QR regime. Simulations are conducted with several variants of the model to ascertain separately the effects of introducing economies of scale, firm entry/exit, departures from competitive pricing, and interactions between entry and pricing rules. Numerical results suggest that a 20 percent rationing rate of intermediates and consumption goods can have welfare costs of about 2.0 percent of national income in the absence of economies of scale and industrial organization interactions with the trade regime. When industrial organization features are included, the costs of the same 20 percent rationing quadruples.

Suggested Citation

  • T. Condon & J. de Melo, 2015. "Industrial Organization Implications of QR Trade Regimes: Evidence and Welfare Costs," World Scientific Book Chapters,in: Modeling Developing Countries' Policies in General Equilibrium, chapter 19, pages 405-419 World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789814494816_0019
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    References listed on IDEAS

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    1. Clarke, Roger & Davies, Stephen & Waterson, Michael, 1984. "The Profitability-Concentration Relation: Market Power or Efficiency?," Journal of Industrial Economics, Wiley Blackwell, vol. 32(4), pages 435-450, June.
    2. Jaime de MELO & Shujiro URATA, 2015. "The Influence of Increased Foreign Competition on Industrial Concentration and Profitability," World Scientific Book Chapters,in: Developing Countries in the World Economy, chapter 9, pages 219-236 World Scientific Publishing Co. Pte. Ltd..
    3. Cox, David & Harris, Richard, 1985. "Trade Liberalization and Industrial Organization: Some Estimates for Canada," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 115-145, February.
    4. Jaime de Melo & David Roland-Holst, 2015. "Industrial Organization and Trade Liberalization: Evidence from Korea," World Scientific Book Chapters,in: Modeling Developing Countries' Policies in General Equilibrium, chapter 18, pages 385-404 World Scientific Publishing Co. Pte. Ltd..
    5. Devarajan, Shantayanan & Rodrik, Dani, 1991. "Pro-competitive effects of trade reform : Results from a CGE model of Cameroon," European Economic Review, Elsevier, vol. 35(5), pages 1157-1184, July.
    6. Julio J. Rotemberg & Garth Saloner, 1989. "Tariffs vs Quotas with Implicit Collusion," Canadian Journal of Economics, Canadian Economics Association, vol. 22(2), pages 237-244, May.
    7. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
    8. 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.
    9. Jere H. Behrman, 1976. "Foreign Trade Regimes and Economic Development: Chile," NBER Books, National Bureau of Economic Research, Inc, number behr76-1, July.
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    Cited by:

    1. Jaime de Melo & David Roland-Holst, 2015. "Industrial Organization and Trade Liberalization: Evidence from Korea," World Scientific Book Chapters,in: Modeling Developing Countries' Policies in General Equilibrium, chapter 18, pages 385-404 World Scientific Publishing Co. Pte. Ltd..
    2. De Melo, Jaime, 1988. "CGE models for the analysis of trade policy in developing countries," Policy Research Working Paper Series 3, The World Bank.
    3. Mark J. Roberts & James R. Tybout, 1991. "Size Rationalization and Trade Exposure in Developing Countries," NBER Chapters,in: Empirical Studies of Commercial Policy, pages 169-200 National Bureau of Economic Research, Inc.
    4. Dani Rodrik, 1988. "Closing the Technology Gap: Does Trade Liberalization Really Help?," NBER Working Papers 2654, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Applied General Equilibrium Models; Trade Policy; Computable General Equilibrium; Archetypes;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F00 - International Economics - - General - - - General
    • F01 - International Economics - - General - - - Global Outlook
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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