This paper investigates the resource reallocation effected by content protection and content preference schemes under alternative assumptions regarding the definition of domestic content, the number of intermediate goods, and the market structure of the domestic intermediate good industry. Content protection is shown to be equivalent to a combination of more familiar commercial policies. However, the extent of application of these policies is determined endogenously by parameters of the production functions for intermediate and final goods. A number of anomalous and undesirable outcomes that may result from content protection and content preference are discussed.

Separate demand equations for imports from less-developed countries (LDCs) and imports from developed countries (DCs) were estimated for each of eleven representative product groups. Imports were found to compete quite readily with domestically produced goods, with plausible own-price and cross-price elasticities. Whereas the quantity of each type of import was found to be quite responsive to changes in the price of US home goods, each appears to be less sensitive to the price of the alternative import. An explanation that is consistent with this observation, and that finds support from detailed industry information, is that DCs and LDCs supply goods that are at different stages in the product or technology cycle, whereas US producers compete in all submarkets. This suggests that trade creation rather than trade diversion provides the predominant inroad for LDCs into the US market. 25 references, 3 tables.

Abstract We characterize trade policies that result from political competition when assessments of well-being include both material and psychosocial components. The material component reflects, as usual, satisfaction from consumption. Borrowing from social identity theory, we take the psychosocial component as combining the pride and self-esteem an individual draws from the status of groups with which she identifies and a dissonance cost she bears from identifying with those that are different from herself. In this framework, changes in social identification patterns that may result, for example, from increased income inequality or heightened class or ethnic tensions, lead to pronounced changes in trade policy. We analyse the nature of these policy changes.

We study the competition between two political parties for seats in a legislature. The parties have fixed positions on some issues, but vary their positions on others in order to attract votes and campaign contributions. In this context, we examine whether special interest groups are governed by an electoral motive or an influence in their campaign giving, and how their contributions affect the equilibrium platforms. We show that each party is induced to behave as if it were maximizing a weighted sum of the aggregate welfares of informed voters and members of special interest groups. The party that is expected to win a majority of seats caters more to the special interests.

Journal Article Trade and Industrial Policy Under Oligopoly: Reply Get access Jonathan Eaton, Jonathan Eaton University of Virginia Search for other works by this author on: Oxford Academic Google Scholar Gene M. Grossman Gene M. Grossman Princeton University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 103, Issue 3, August 1988, Pages 603–607, https://doi.org/10.2307/1885548 Published: 01 August 1988

We introduce firm and worker heterogeneity into a model of innovation†driven endogenous growth. Individuals who differ in ability sort into either a research activity or a manufacturing sector. Research projects generate new varieties of a differentiated product. Projects differ in quality and the resulting technologies differ in productivity. In both sectors, there is a complementarity between firm quality and worker ability. We study the co†determination of growth and income inequality in both the closed and open economy, as well as the spillover effects of policy in one country to outcomes in others.

How does globalization affect economic growth? We discuss mechanisms that link international integration to the incentives for knowledge accumulation and the efficacy of that process. First, integration facilitates the flow of knowledge across national borders. Second, integration affords innovators a larger potential market even as it subjects them to additional competition from foreign rivals. Third, integration encourages specialization according to comparative advantage. Finally, integration affects the incentives for technological diffusion. Taken together, the literature offers many theoretical insights. Some progress has also been made on the empirical side, although data and methodological impediments have left assessment and measurement lagging behind.

We develop a competitive model of trade between countries with similar aggregate factor endowments. The trade pattern reflects differences in the distribution of talent across the labor forces of the two countries. The country with a relatively homogeneous population exports the good produced by a technology with complementarities between tasks. The country with a more diverse workforce exports the good for which individual success is more important. Imperfect observability of talent strengthens the forces of comparative advantage. Finally, we examine the effects of trade on income distribution and the composition of firms in each industry. (JEL F11, D51)

Financial Economics, International Relations/Trade

We study a world with national external economies of scale at the industry level. In contrast to the standard treatment with perfect competition and two industries, we assume Bertrand competition in a continuum of industries. With Bertrand competition, each firm can internalize the externalities from production by setting a price below those set by others. This out-of-equilibrium threat eliminates many of the “pathologies” of the standard treatment. There typically exists a unique equilibrium with trade guided by “natural” comparative advantage. And, when a country has CES preferences and any finite elasticity of substitution between goods, gains from trade are ensured.