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Economies of Scale and Imperfect Competition in an Applied General Equilibrium Model of the Australian Economy

In: Increasing Returns and Economic Analysis

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  • Kaludura Abayasiri-Silva
  • Mark Horridge

Abstract

In a pioneering paper, Harris (1984) emphasized the importance of imperfect competition and economies of scale in understanding the effects of trade liberalization on the Canadian economy within an applied general equilibrium framework. He argued that a general equilibrium analysis which incorporates scale economies and imperfect competition yields significantly different results from one that does not. Thus, his estimated static long-run gains to Canada of trade liberalization were in the range of 8–12% of GNP: considerably larger than those suggested by conventional estimates which assume perfect competition.

Suggested Citation

  • Kaludura Abayasiri-Silva & Mark Horridge, 1998. "Economies of Scale and Imperfect Competition in an Applied General Equilibrium Model of the Australian Economy," Palgrave Macmillan Books, in: Kenneth J. Arrow & Yew-Kwang Ng & Xiaokai Yang (ed.), Increasing Returns and Economic Analysis, chapter 14, pages 307-334, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-26255-7_19
    DOI: 10.1007/978-1-349-26255-7_19
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    References listed on IDEAS

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    1. Devarajan, Shantayanan & Rodrik, Dani, 1989. "Trade Liberalization in Developing Countries: Do Imperfect Competition and Scale Economies Matter?," American Economic Review, American Economic Association, vol. 79(2), pages 283-287, May.
    2. Hertel, Thomas & Lanclos, D. Kent & Thursby, Marie, 1991. "General Equilibrium Effects of Trade Liberalization in the Presence of Imperfect Competition," 1991 Conference, August 22-29, 1991, Tokyo, Japan 183247, International Association of Agricultural Economists.
    3. Peter Cory & Mark Horridge, 1985. "A Harris-style miniature version of ORANI," Centre of Policy Studies/IMPACT Centre Working Papers op-54, Victoria University, Centre of Policy Studies/IMPACT Centre.
    4. Harris, Richard, 1984. "Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition," American Economic Review, American Economic Association, vol. 74(5), pages 1016-1032, December.
    5. Randall Wigle, 1988. "General Equilibrium Evaluation of Canada-U.S. Trade Liberalization in a Global Context," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 539-564, August.
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    Cited by:

    1. Peter Dixon & Michael Jerie & Maureen Rimmer, 2016. "Modern Trade Theory for CGE Modelling: The Armington, Krugman and Melitz Models," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 1(1), pages 1-110, June.
    2. Minor, Peter J., 2010. "Time as a Barrier to Trade: A GTAP Database of ad valorem Trade Time Costs," Conference papers 331960, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    3. Peter B. Dixon & Mark R. Picton & Maureen T. Rimmer, 2004. "Payroll Taxes: Thresholds, Firm Sizes, Dead‐weight Losses and Commonwealth Grants Commission Funding," The Economic Record, The Economic Society of Australia, vol. 80(250), pages 289-301, September.
    4. Naranpanawa, Athula & Arora, Rashmi, 2014. "Does Trade Liberalization Promote Regional Disparities? Evidence from a Multiregional CGE Model of India," World Development, Elsevier, vol. 64(C), pages 339-349.
    5. Betarelli, Admir Antonio & Domingues, Edson Paulo & Hewings, Geoffrey John Dennis, 2020. "Transport policy, rail freight sector and market structure: The economic effects in Brazil," Transportation Research Part A: Policy and Practice, Elsevier, vol. 135(C), pages 1-23.
    6. Peter B. Dixon & Maureen T. Rimmer, 2010. "Simulating the U.S. Recession with and without the Obama package: the role of excess capacity," Centre of Policy Studies/IMPACT Centre Working Papers g-193, Victoria University, Centre of Policy Studies/IMPACT Centre.
    7. Wittwer, Glyn & Griffith, Marnie, 2011. "Modelling drought and recovery in the southern Murray-Darling basin," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(3), pages 1-18, September.
    8. Naranpanawa, Athula & Arora, Rashmi, 2012. "Trade Liberalisation and Regional Disparities: Evidence from a Multi-Regional General Equilibrium Model of India," Conference papers 332270, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    9. Hao Xiao & Shujin Zhu & Lafang Wang, 2009. "Will the financial crisis become the turning point for China's auto industry? A dynamic computable general equilibrium analysis with imperfect competition," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 7(4), pages 477-497.
    10. Koushik Das & Pinaki Chakraborti, 2012. "International Trade, Environment and Market Imperfection: A Computable General Equilibrium Analysis for India," South Asian Journal of Macroeconomics and Public Finance, , vol. 1(2), pages 157-190, December.
    11. Kaludura Abayasiri-Silva & Mark Horridge, 1998. "The Effects of Current Fiscal Restraint on the Australian Economy: an Applied General Equilibrium Analysis with Imperfect Competition," Centre of Policy Studies/IMPACT Centre Working Papers op-91, Victoria University, Centre of Policy Studies/IMPACT Centre.
    12. Productivity Commission, 2008. "Modelling Economy-wide Effects of Future Automotive Assistance," Research Reports, Productivity Commission, Government of Australia, number 30.

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    More about this item

    Keywords

    Trade Liberalization; Australian Economy; Imperfect Competition; Price Rule; Marginal Cost Price;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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