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Effects of FTA Provisions on the Market Structure of the Korean Automobile Industry

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  • Minsoo Park
  • Hongjai Rhee

Abstract

The Korean passenger car market is dominated by a few domestic producers. In this paper, we investigate whether this market structure is the result of import tariffs and taxes that penalize foreign manufacturers. Our counterfactual simulation under two FTA scenarios shows that the market shares of imported and domestic cars show minimal adjustments, suggesting that import tariffs and taxes may not explain the lack of penetration of import cars in Korea. We predict changes in consumer surplus and discuss the policy implications of our findings. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Minsoo Park & Hongjai Rhee, 2014. "Effects of FTA Provisions on the Market Structure of the Korean Automobile Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 45(1), pages 39-58, August.
    • Handle: RePEc:kap:revind:v:45:y:2014:i:1:p:39-58
    DOI: 10.1007/s11151-014-9417-0
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    1. Jan De Loecker & Johannes Van Biesebroeck, 2016. "Effect of International Competition on Firm Productivity and Market Power," NBER Working Papers 21994, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    FTA; Tariff elimination; Automobile industry; Nested logit; F14; F17; L62;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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