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Can Indonesia Gain from Log Export Barriers?

  • Arunanondchai, May
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    We use a model of sequentialduop oly to examine the effect of verticalo wnership structure on firms’ outputs and profit shares in the internationalmark et for raw and processed tropicaltim ber products. The modelpro vides insights that can be applied to the Indonesian logging and plywood industry; shedding light on the appropriate policy responses. We find that when industries are integrated, the government should subsidise both exports. Thus, despite log and plywood being strategic substitutes, log export barriers make Indonesia worse off. When industries are separated, however, plywood exports should be subsidised but the optimal trade policy on log exports depends on two effects. If the commitment failure effect (as in Brander and Spencer (1985)) dominates then log exports should be subsidised, however, if the negative cross-industry effect dominates then log exports should be taxed.

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    Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 619.

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    Length: 33 pages
    Date of creation: 2001
    Date of revision:
    Handle: RePEc:wrk:warwec:619
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    1. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 383-406.
    2. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
    3. Gérard Gaudet & Ngo Van Long & Antoine Soubeyran, 1999. "Upstream-Downstream Specialization by Integrated Firms in a Partially Integrated Industry," Review of Industrial Organization, Springer, vol. 14(4), pages 321-335, June.
    4. Barbara J. Spencer & Ronald W. Jones, 1989. "Trade and Protection in Vertically Related Markets," NBER Working Papers 3023, National Bureau of Economic Research, Inc.
    5. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
    6. Greenhut, M L & Ohta, H, 1979. "Vertical Integration of Successive Oligopolists," American Economic Review, American Economic Association, vol. 69(1), pages 137-41, March.
    7. repec:tpr:qjecon:v:101:y:1986:i:2:p:383-406 is not listed on IDEAS
    8. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
    9. Barbier, E B & Burgess, J C, 2001. " The Economics of Tropical Deforestation," Journal of Economic Surveys, Wiley Blackwell, vol. 15(3), pages 413-33, July.
    10. Barbara J. Spencer & Ronald W. Jones, 1991. "Vertical Foreclosure and International Trade Policy," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 153-170.
    11. repec:bla:restud:v:58:y:1991:i:1:p:153-70 is not listed on IDEAS
    12. Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 345-356.
    13. Barbara J. Spencer & Ronald W. Jones, 1989. "Vertical Foreclosure and International Trade Policy," NBER Working Papers 2920, National Bureau of Economic Research, Inc.
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