|This centre is a member of The LSE Research Laboratory [RLAB]: CASE | CVER | CEP | SERC | STICERD||Cookies?|
Paper No' CEPDP0900: | Full paper
Save Reference as: BibTeX File | EndNote Import File
Keywords: International trade; tariffs, hold-up problem, sourcing, organizational form
JEL Classification: F13; L23; D23
Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: CEP Discussion Papers
Share this page: Google Bookmarks | Facebook | Twitter
Abstract:We study the impact of import protection on relationship-specific investments, organizational choice and welfare. We show that a tariff on intermediate inputs can improve social welfare through mitigating hold-up problems. It does so if it discriminates in favor of the investing party, thereby improving its bargaining position. On the other hand, a tariff can prompt inefficient organizational choices if it discriminates in favor of less productive firms or if integration costs are low. Protection distorts organizational choices because tariff revenue, which is external to the firms, drives a wedge between the private and social gains to offshoring and integration.
Copyright © RLAB & LSE 2003 - 2015 | LSE, Houghton Street, London WC2A 2AE | Contact: RLAB | Site updated 03 September 2015