Neil Vousden

Protectionist responses and declining industries

Abstract This paper employs a three-factor Ricardo-Viner model of a small economy to analyse the effect of a falling world import price on the domestic price of the economys importable good in the presence of an endogenously determined tariff. The outcome is seen to depend on (a) the way in which the recycled tariff revenue is allocated to the three factor groups, and (b) differences in relative risk aversion across those groups. However, under reasonable assumptions, Hillmans (1982) result that ‘a declining industry will continue to decline’ is seen to hold in our general equilibrium framework.

Risk-Averse Rent Seeking with Shared Rents

This paper presents a Nash equilibrium model of rent-seeking behavior in which risk-averse players expend resources to obtain a share of a rent, as for example in contests for import quota licences. Results are obtained relating the equilibrium level of lobbying effort by each player to the value of the rent. In particular, reduced individual lobbying effort is associated with higher rents contested if players are sufficiently risk averse. The question of whether the value of rents is a good measure of the resource cost of rent seeking is also considered. A simple approximation involving risk and risk-aversion parameters is derived for the proportion of rents dissipated in long-run equilibrium. Risk and risk aversion are seen to reduce the rent-dissipation ratio below unity. Copyright 1987 by Royal Economic Society.

Content protection and tariffs under monopoly and competition

Abstract This paper compares the relative efficiency of local content schemes and tariffs as alternative means of achieving certain non-economic/distributional objectives. The efficiency comparison is made under the alternative assumptions that an intermediate good/component is produced (a) competitively and (b) by a single firm. The paper shows how the ranking of tariffs and content schemes (i) is sensitive to these assumptions and (ii) depends on the local content ratio and the elasticity of demand for components. The possible implications of vertical integration in the production process and rent/revenue seeking behaviour are also considered insofar as they affect the ranking of policies.

The organizational cost of protection

Abstract This paper offers another explanation for the proposition that protection induces slack. It employs a model of a hierarchic firm in which the firms owner cannot observe the cost type or the effort level of his manager. A production subsidy, by stimulating output, may increase the marginal information rents that have to be paid to the manager for higher effort. The resulting increase in the firms marginal cost of effort leads to reduced managerial effort amplifying the intra-firm effort distortion if effort is initially below the optimal level and yielding an organizational cost of protection additional to the standard deadweight cost.

Incentives and static and dynamic gains from market reform: rice production in Vietnam

This article develops a dynamic model to account for the enhanced incentive effects that result from market reform through a move toward private property rights and competitive markets. Reform is captured through an emerging profits function which depends on effective prices and incentives to work harder. Static and dynamic output gains from reform are derived through increases in total factor productivity and induced capital accumulation. The model is applied to rice production in Vietnam over the period 1976–94. The more extensive is market reform, the larger the effects found on rice output, the capital stock and transitional growth rates, suggesting that incentives and more competitive markets matter greatly.

Trade and Trade Policy in Endogenous Growth Models

Since the late 1980s, trade theorists have been aware that trading opportunities and trade policy can have important, and lasting, effects on a nation’s rate of economic growth. Conversely, since the time of Edgeworth, Mill and Ricardo trade economists have been studying the consequences of ongoing improvements in technology and growth of factor endowments for trading opportunities and trade policy. I follow this division of labour by specializing this review in a similar, and, I hope, complementary manner. The first goal of this chapter is to synthesize the major theoretical results from the new growth theory linking international trade and trade policy to permanent and lasting effects on growth rates. The second goal is to study how the consequences of ongoing endogenous growth may affect the incentives governments have to restrict trade at a point in time, and how endogenous growth can shape and limit the form of self-enforcing trade liberalizations that are supportable over time.

Training and Technology Transfer

This paper analyses technology transfer from a multinational corporation (MNC) to a developing economy via training of local workers by the MNC. The paper analyses the determinants of the level of training by the MNC assuming a local entrant can subsequently hire MNC–trained workers and compete with the MNC. It is shown that a small training subsidy paid by the host government may cause the MNC to switch from entry–deterring behaviour to entry–accommodating behaviour. Such a subsidy will cause an increase in the number of skilled workers but may increase or decrease the domestic welfare of the developing country.

An open-city model with nonmalleable housing

Abstract Previous city and housing models are extended to allow for the nonmalleability of housing and two classes of residents. The model, which is framed in the context of a monocentric circular city, assumes an individual housing unit to be defined in terms of attributes (quality and residential density). The quality of a given housing unit can be varied without adjustment costs, but changes in residential density on a particular site require prior demolition of the existing structure on the site. Producers of housing and consumers are assumed to be myopic. By assuming that the city is in short-run equilibrium at each point of time, it is shown that the pattern of land use observed at any stage depends on the past history of the city and the current rates of population growth. The possibilities for filtering of houses from one income group to another are also discussed briefly.

The Economics of Trade Protection.

Over the past two decades there has been a gradual but fundamental change in the nature of trade protection. Even as international negotiation has succeeded in reducing tariffs to low levels, national governments have resorted to a range of increasingly intricate policies to protect their domestic industries from foreign competition. Direct quantitative restrictions on international trade have become particularly widespread. Such nontariff barriers often have very different effects from tariffs and require careful analysis in their own right. This book presents a systematic overview of the modern theory of trade protection. The material in the book divides naturally into four sections. The first section covers trade restrictions in competitive markets, the second trade restrictions and imperfect competition, the third the political economy of trade protection, and the fourth the theory of policy reform. The presentation makes extensive use of diagrams, with the more difficult mathematics included in six appendixes. This approach emphasises microeconomics and makes the book suitable for graduate and advanced undergraduate students in the social sciences who have taken one intermediate microeconomics course.