The causes and consequences of steel subsidization in Germany
The purpose of this essay is to investigate the possible economic consequences of the recent German steel subsidy program and assess to what extent those consequences conform with the objectives which motivated that program's adoption. The paper is organized as follows: Particular developments in the steel industry are briefly described in section II, while in section III, the political economy of protection in Germany is examined to determine the primary beneficiaries of previous protectionist policies. Both serve as a basis for identifying the revealed political objectives behind the current steel program. The next step is to simulate the economic consequences of a decline in the world market price of steel in the absence of any government intervention, using a multi-sectoral general equilibrium model of an open economy that resembles Germany. The economic impacts of a sectoral policy response and a regional policy response are then likewise examined and compared. This occurs in section V. The main elements and assumptions of the model used are outlined in section IV; the complete model specification is presented in an appendix. Conclusions are drawn in section VI.
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- Glismann, Hans H. & Weiss, Frank D., 1980. "On the political economy of protection in Germany," Kiel Working Papers 113, Kiel Institute for the World Economy.
- Mayer, Wolfgang, 1974. "Short-Run and Long-Run Equilibrium for a Small Open Economy," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 955-67, Sept./Oct.
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Kiel Working Papers
41, Kiel Institute for the World Economy.
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- Ingo Walter, 1979. "Protection of Industries in Trouble—the Case of Iron and Steel," The World Economy, Wiley Blackwell, vol. 2(2), pages 155-187, 05.
- Lächler, Ulrich, 1984. "The elasticity of substitution between imported and domestically produced goods in Germany," Kiel Working Papers 200, Kiel Institute for the World Economy.
- Neary, J Peter, 1978. "Short-Run Capital Specificity and the Pure Theory of International Trade," Economic Journal, Royal Economic Society, vol. 88(351), pages 488-510, September.
- Constantopoulos, Maria, 1974. "Labour protection in Western Europe," European Economic Review, Elsevier, vol. 5(4), pages 313-328, December.
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