DP399 Industrial Organization and Trade Liberalization: Evidence from Korea
|Author(s):||Jaime de Melo, David Roland-Holst|
|Publication Date:||May 1990|
|Keyword(s):||Industrial Organization, Korea, Protectionism, Returns to Scale, Tariffs, Welfare Costs|
|JEL(s):||421, 422, 616|
|Programme Areas:||International Trade and Regional Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=399|
Based on evidence about industrial organization and market structure, this paper develops a CGE model with increasing returns to scale (IRTS) in selected industrial sectors in order to estimate the welfare gains Korea would achieve from abolishing the import restraints (tariffs and equivalent measures) prevailing in 1982. Under constant returns (CRTS) across the board, welfare gains are estimated at 1% of GDP. With IRTS in three industrial sectors, welfare gain estimates range from -0.5% to 10% of 1982 GDP, depending on the assumptions concerning price setting behavior and profit levels that existed under protecti.