Journal Article Imperfect Competition and the Resource Allocative Effects of Effective Protection Get access Edward John Ray Edward John Ray Ohio State University Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 43, Issue 2, June 1976, Pages 363–368, https://doi.org/10.2307/2297332 Published: 01 June 1976

Journal Article The Impact of Monopoly Pricing on the Lerner Symmetry Theorem: Reply Get access Edward John Ray Edward John Ray Ohio State University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 98, Issue 3, August 1983, Pages 535–537, https://doi.org/10.2307/1886027 Published: 01 August 1983

I. Introduction, 591. — II. The Lerner and McKinnon symmetry theorems, 591. — III. Imperfect competition and the Lerner Symmetry Theorem, 595.

This paper provides empirical evidence on the relative impact of the generalized system of preferences, adopted in 1975, and the Caribbean Basin Initiative, adopted in 1983, on the pattern of U.S. imports of manufactured goods from the target areas at the four-digit level in 1984. Imports from Brazil, Mexico, South America, the Caribbean Basin, and all eligible countries are each analyzed. The author provides evidence that existing preferential agreements have failed to offset the bias in U.S. protection against competitive exports from developing countries and explains why one might have predicted such an outcome. Copyright 1987 by MIT Press.

V IRTUALLY every textbook on international trade contains a discussion and/or derivation of the optimum tariff for a country with monopoly power in world trade. Invariably these are treatments of aggregate tariff policy. Little or no work has been done to explain the infra-structure of tariffs within a given country or to explain in what respects tariffs might be expected to be similar across countries. Some papers have explored the impact of tariffs and tariff changes on domestic welfare, labor's share of income and trade prospects for developing countries. Contributions to this literature include Anderson (1972), Balassa (1965, 1967a, 1967b, 1971); Ball (1967); Basevi (1966, 1968); Cohen and Sisler (1971); Kreinen (1961, 1967); Mitchell (1970); Travis (1968) and many others. Yet, none of these studies has offered a well specified analytical framework that would permit a systematic investigation of testable hypotheses concerning the relative protection of industries: within and across countries. Instead, many of these papers have relied upon intuitive but ad hoc explanations of the data they presented. The purpose of this paper is two-fold. First, we will begin a systematic inquiry into the determinants of tariff policy at the industry level by developing a simple model based upon profit maximizing behavior in section II. Secondly, we will use the derivations of section II, along with data from previous studies by Balassa (1965, 1971) to demonstrate that a number of the ad hoc explanations of tariff data by previous authors are consistent with our simple .model. In addition, we will develop and test new hypotheses based on the analytical developments of section II. For example, we will be able to explain the pyramiding of tariffs in developed and less developed countries, the pattern of the rank correlations between effective protective rates for countries at similar and different levels of economic development, the greater variation in tariffs on primary products than on manufactured goods in developing countries, the greater variation and average value of tariffs on manufactured goods in developing countries and, finally, the relationship between the skill intensity of production and tariff protection in manufacturing in both developed and developing countries. Perhaps, most important of all our results is the fact that, by demonstrating that ad hoc explanations of previous studies are consistent with our explicit formulation of tariff determination at the industry level, we facilitate the development of future advances in this area.

Recently in this Review, Harvey Lapan developed a dynamic analysis of distortions in domestic labor markets. His primary contribution was to point out that the static solution to the problem of distortions is incompatible with optimal adjustment to long-run equilibrium. Lapan concluded that labor market distortions could be handled optimally by providing employment subsidies to firms in the depressed sector that are somewhat less than the employment subsidies implied by static analysis. Unemployment would exist and serve as a policy instrument to encourage labor migration from the depressed sector to the rest of the economy. In contrast, I will argue that optimal intervention should consist of two elements: a subsidy to employment in the depressed area exactly equal to the static optimal subsidy; and transfer payments to workers to cover the costs of migration from the declining sector of the economy. With this program there would be no unemployment in the depressed area in the short run. The fundamental point I wish to make is that in a dynamic setting, optimal intervention requires the use of two policy instruments, not one. The optimal solution entails both an offset to existing short-run distortions, and a replication of the dynamic path the economy would follow if markets were perfect.

This paper develops and tests a simple model for the determination of tariff and nontariff barriers to trade across industries within the United States, using 1970 trade data. We find that nontariff trade restrictions have supplemented tariff protection in the United States. Both tariff and nontariff trade restrictions are biased toward industries in which the United States has an apparent comparative disadvantage in world trade and away from industries in which consumer welfare losses from protection would be great. We also find substantial evidence that tariff and nontariff trade restrictions predominate in industries with very different market characteristics.

This paper develops and tests a simple model for the determination of tariff and nontariff barriers to trade across industries within the United States, using 1970 trade data. We find that nontariff trade restrictions have supplemented tariff protection in the United States. Both tariff and nontariff trade restrictions are biased toward industries in which the United States has an apparent comparative disadvantage in world trade and away from industries in which consumer welfare losses from protection would be great. We also find substantial evidence that tariff and nontariff trade restrictions predominate in industries with very different market characteristics.

The purpose of this paper is to present a simple model, based on profit-maximizing behavior, that can be used to derive estimable equations for U.S. foreign direct investment in manufacturing. Our estimation of foreign-investment equations requires estimates of production functions for U.S. manufacturing subsidiaries abroad. Specifically, I estimate the production function to be a constant-returns-to-scale, homogeneous, transcendental logarithmic function. I also present evidence in the form of my estimated foreign-direct-investment equation that domestic and foreign markets may be imperfectly competitive.