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Complementarity and Increasing Returns in Intermediate Inputs: A Theoretical and Applied General-Equilibrium Analysis / Florencio Lopez-de-Silane, James R. Markusen, Thomas F. Rutherford.
- Format:
- Book
- Author/Creator:
- Lopez-de-Silane, Florencio.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w4179.
- NBER working paper series no. w4179
- Language:
- English
- Subjects (All):
- Protectionism--Econometric models.
- Protectionism.
- Automobile industry and trade.
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Complementarity and Increasing Returns in Intermediate Inputs
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1992.
- Cambridge, Massachusetts : National Bureau of Economic Research, 1992.
- Summary:
- Conventional analysis in the trade-industrial-organization literature suggests that, when a country has some market power over an imported good, some small level of protection must be welfare improving. This is essentially a terms-of-trade argument that is reinforced if the imported goods are substitutes for domestic goods produced with increasing returns to scale, goods that are initially underproduced in free-trade equilibrium. This paper notes that this result may not hold when (1) the imports are intermediates used in a domestic increasing-returns industry, and/or (2) the intermediates are complements for domestic inputs produced with increasing returns. We then demonstrate such an outcome with respect to Mexican protection against imported auto parts using an applied general-equilibrium model of the North American auto industry.
- Notes:
- Print version record
- October 1992.
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