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Trade Protection, Industrial Policy, and the Shaping of Local Preferences

Author

Listed:
  • Miravete, Eugenio
  • Moral, Maria

Abstract

The Spanish industrial policy prohibited automobiles imports from 1939 to 1986, when Spain joined the European Union. We document how the industrial policy spurred the development led Spain to become the 5th largest automobile manufacturer in the world. This policy limited consumer choice but also resulted in pronounced regional and national home bias favoring local brands. We estimate a rich oligopoly equilibrium model to approximate the protection equivalence of the long-lasting effect of industrial policy through changes in consumer preferences.Today, domestic automakers still enjoy an advantage equivalent to an 8.5% tariff, compared to the 10.3% import-duty into the EU.

Suggested Citation

  • Miravete, Eugenio & Moral, Maria, 2024. "Trade Protection, Industrial Policy, and the Shaping of Local Preferences," CEPR Discussion Papers 19765, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19765
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    File URL: https://cepr.org/publications/DP19765
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    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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