This paper interprets seventeenth-century mercantilism in light of recent theories of strategic trade policy. Long-distance international commerce during the mercantilist period was undertaken chiefly by state-chartered monopoly trading companies and was therefore conducted under conditions of imperfect competition. The economic structure of the Anglo-Dutch rivalry for the East India trade provides an excellent illustration of an environment in which the profit-sharting motive for strategic trade policies exists. Dutch supremacy in the early East India trade was facilitated by a managerial incentive scheme in the monopoly charter that enabled it to achieve a Stackelberg leadership position against the English. Using data from the East India trade around 1620 in a Cournot duopoly model, I find that the managerial incentives yielded greater Dutch profits than would have been obtained from a standard profit-maximizing objective and that the scope for other strategic trade policies was clearly present.

The classical economists engaged in a vigorous debate over whether Britain's tariff reductions in the 1840s should be made contingent on tariff liberalization abroad. Some, notably Robert Torrens, believed that a unilateral tariff reduction would so deteriorate British terms of trade as to outweigh efficiency gains and make the country worse off. In this paper, Britain's foreign trade elasticities are estimated for this period in a simultaneous equation model. They are used in a simple general equilibrium model that explicitly takes the terms of trade into account to assess the welfare impact of tariff reductions. The results indicate that Britain would have been made worse off from a unilateral tariff reduction. However, foreign tariff reductions mitigated the terms of trade deterioration and could easily have made Britain better off.

The semiconductor industry is often cited as a "strategic" industry in part because important learning-by-doing spillovers may justify special industrial policies. Documenting the precise nature of these spillovers is crucial for determining the advisability of such policies and is helpful for understanding the contribution of learning to endogenous growth. Yet existing empirical evidence on learning by doing in semiconductor production is scant and evidence on spillovers is nonexistent. Using quarterly, firm-level data on seven generations of dynamic random access memory (DRAM) semiconductors over 1974-92, we find that (a) learning rates average 20 percent, (b) firms learn three times more from an additional unit of their own cumulative production than from an additional unit of another firm's cumulative production, (c) learning spills over just as much between firms in different countries as between firms within a given country, (d) Japanese firms are indistinguishable from others in learning speed, and (e) intergenerational learning spillovers are weak, being marginally significant in only two of seven DRAM generations.

This paper interprets seventeenth-century mercantilism in light of recent theories of strategic trade policy. Long-distance international commerce during the mercantilist period was undertaken chiefly by state-chartered monopoly trading companies and was therefore conducted under conditions of imperfect competition. The economic structure of the Anglo-Dutch rivalry for the East India trade provides an excellent illustration of an environment in which the profit-sharting motive for strategic trade policies exists. Dutch supremacy in the early East India trade was facilitated by a managerial incentive scheme in the monopoly charter that enabled it to achieve a Stackelberg leadership position against the English. Using data from the East India trade around 1620 in a Cournot duopoly model, I find that the managerial incentives yielded greater Dutch profits than would have been obtained from a standard profit-maximizing objective and that the scope for other strategic trade policies was clearly present.

The classical economists engaged in a vigorous debate over whether Britain's tariff reductions in the 1840s should be made contingent on tariff liberalization abroad. Some, notably Robert Torrens, believed that a unilateral tariff reduction would so deteriorate British terms of trade as to outweigh efficiency gains and make the country worse off. In this paper, Britain's foreign trade elasticities are estimated for this period in a simultaneous equation model. They are used in a simple general equilibrium model that explicitly takes the terms of trade into account to assess the welfare impact of tariff reductions. The results indicate that Britain would have been made worse off from a unilateral tariff reduction. However, foreign tariff reductions mitigated the terms of trade deterioration and could easily have made Britain better off.

The semiconductor industry is often cited as a strategic industry in part because important learning spillovers may justify special industrial policies. Using quarterly, firm-level data on seven generations of dynamic random access memory semiconductors over 1974-92, the authors find that learning rates average 20 percent, firms learn three times more from an additional unit of their own cumulative production than from an additional unit of another firm's cumulative production, learning spills over just as much between firms in different countries as between firms within a given country, and intergenerational learning spillovers are weak.