Trade Policy And Market Structure Interactions In Developing Countries
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Trade Policy and Market Structure Interactions in Developing Countries
Author | : International Monetary Fund |
Publisher | : International Monetary Fund |
Total Pages | : 32 |
Release | : 1989-10-27 |
Genre | : Business & Economics |
ISBN | : 1451951639 |
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This paper shows that the presence of quotas on imported inputs that are based on installed capacity can lead to capacity underutilization in manufacturing industries of developing countries. A replacement of such quotas, by tariffs leads to full capacity utilization under assumptions of both perfectly and imperfectly competitive markets. Furthermore, such a policy also eliminates strategic advantages for oligopolistic firms that arise in quota-based regimes.
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