The Optimal Dynamic Infant Industry Protection in Joining a Free Trade Agreement: A Numerical Analysis of the Vietnamese Motorcycle Industry
This paper investigates the optimal dynamic paths of trade protection imposed on infant industries during the process of joining a free trade agreement. The framework is based on the dynamic learning-by-doing model developed in Melitz (2005), where industries are experiencing dynamic externalities. In this framework, restricted-time protection is introduced as a realistic approach to correspond to the conditions of actual agreements. According to the computational analysis, in some feasible cases of optimal tariff paths may not follow a downward trend, as conventional wisdom would suggest. The results of the numerical simulation applied to the Vietnamese motorcycle industry support these findings.
|Date of creation:||May 2011|
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- Head, Keith, 1994. "Infant industry protection in the steel rail industry," Journal of International Economics, Elsevier, vol. 37(3-4), pages 141-165, November.
- Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
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- Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 369-405.
- Melitz, Marc J., 2005.
"When and how should infant industries be protected?,"
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Elsevier, vol. 66(1), pages 177-196, May.
- Melitz, Marc, 2005. "When and How Should Infant Industries Be Protected?," Scholarly Articles 3228378, Harvard University Department of Economics.
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