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Industrial Policy As an Alternative to Trade Policy: Helping By Hurting *
Author(s) -
Karp Larry S.,
Perloff Jeffrey M.
Publication year - 1993
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.1993.tb00021.x
Subject(s) - subsidy , oligopoly , economics , market power , government (linguistics) , investment (military) , rent seeking , industrial policy , power (physics) , public economics , international economics , microeconomics , market economy , welfare , monopoly , linguistics , philosophy , politics , political science , law , physics , quantum mechanics
Abstract Industrial policies that are essentially nonlinear taxes or subsidies on adjustment costs of domestic firms affect those firms' market power in oligopolistic international markets. These adjustment policies often can achieve a strategic purpose at lower cost to the government than linear trade or investment subsidies and are less likely to result in retaliation by other governments. Many governments, however, use adjustment policies for nonstrategic purposes without recognizing that they are reducing their firms' market power by subsidizing adjustment costs rather than taxing them.