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dc.contributor.authorMelitz, Marc
dc.date.accessioned2009-08-30T20:02:58Z
dc.date.issued2005
dc.identifier.citationMelitz, Marc J. 2005. When and how should infant industries be protected?. Journal of International Economics 66, no. 1: 177-196.en
dc.identifier.issn0022-1996en
dc.identifier.urihttp://nrs.harvard.edu/urn-3:HUL.InstRepos:3228378
dc.description.abstractThis paper develops and analyzes a welfare maximizing model of infant industry protection. The domestic infant industry is competitive and experiences dynamic learning effects that are external to firms. The competitive foreign industry is mature and produces a good that is an imperfect substitute for the domestic good. A government planner can protect the infant industry using domestic production subsidies, tariffs, or quotas in order to maximize domestic welfare over time. As protection is not always optimal (although the domestic industry experiences a learning externality), the paper shows how the decision to protect the industry should depend on the industry's learning potential, the shape of the learning curve, and the degree of substitutability between domestic and foreign goods. Assuming some reasonable restrictions on the flexibility over time of the policy instruments, the paper subsequently compares the effectiveness of the different instruments. Given such restrictions, the paper shows that quotas induce higher welfare levels than tariffs. In some cases, the dominance of the quota is so pronounced that it compensates for any amount of government revenue loss related to the administration of the quota (including the case of a voluntary export restraint, where no revenue is collected). In similar cases, the quota may even be preferred to a domestic production subsidy.en
dc.description.sponsorshipEconomicsen
dc.language.isoen_USen
dc.publisherElsevier Science B.V.en
dc.relation.isversionofhttp://dx.doi.org/10.1016/j.jinteco.2004.07.001en
dash.licenseLAA
dc.subjectlearning-by-doingen
dc.subjectquotas and tariffsen
dc.subjectinfant industry protectionen
dc.titleWhen and How Should Infant Industries Be Protected?en
dc.relation.journalJournal of International Economicsen
dash.depositing.authorMelitz, Marc
dc.identifier.doi10.1016/j.jinteco.2004.07.001*
dash.contributor.affiliatedMelitz, Marc


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