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Adjustability in production and dynamic effects of domestic competition policy

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  • Rui Ota

Abstract

This study explores the effect on trade balance of suppressing competition in the domestic non-tradable sector through the interaction between the short-run adjustment and the long-run adjustment in production process. Constructing a model that can capture a more short-run aspect than Yano (2001), this study demonstrates that the effect depends on the factor intensity ranking between the tradable sector and the non-tradable sector. In this model, a change in the price of the tradable good at time 0 plays an important role to explain this result.

Suggested Citation

  • Rui Ota, 2006. "Adjustability in production and dynamic effects of domestic competition policy," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(4), pages 431-439.
    • Handle: RePEc:taf:jitecd:v:15:y:2006:i:4:p:431-439
    DOI: 10.1080/09638190601037435
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    References listed on IDEAS

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    1. Mussa, Michael, 1974. "Tariffs and the Distribution of Income: The Importance of Factor Specificity, Substitutability, and Intensity in the Short and Long Run," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1191-1203, Nov.-Dec..
    2. Maurice Obstfeld, 1982. "Aggregate Spending and the Terms of Trade: Is There a Laursen-Metzler Effect?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 97(2), pages 251-270.
    3. Mayer, Wolfgang, 1974. "Short-Run and Long-Run Equilibrium for a Small Open Economy," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 955-967, Sept./Oct.
    4. Matsuyama, Kiminori, 1987. "Current account dynamics in a finite horizon model," Journal of International Economics, Elsevier, vol. 23(3-4), pages 299-313, November.
    5. Yano, Makoto, 2001. "Trade Imbalance and Domestic Market Competition Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(3), pages 729-750, August.
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    Cited by:

    1. Ma, Yan, 2009. "Trade theorems in a model of vertical production chain," International Review of Economics & Finance, Elsevier, vol. 18(1), pages 70-80, January.

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