Protection and international sourcing

Ornelas, Emanuel ORCID: 0000-0001-8330-8745 and Turner, John L. (2008) Protection and international sourcing. CEP Discussion Paper (900). London School of Economics and Political Science. Centre for Economic Performance, London, UK. ISBN 9780853283331

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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.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://cep.lse.ac.uk/
Additional Information:	© 2008 The authors
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HF Commerce
JEL classification:	D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior; Transaction Costs; Property Rights F - International Economics > F1 - Trade > F13 - Commercial Policy; Protection; Promotion; Trade Negotiations; International Trade Organizations L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L23 - Organization of Production
Date Deposited:	06 Jul 2010 15:38
Last Modified:	11 Dec 2024 18:53
URI:	http://eprints.lse.ac.uk/id/eprint/28511

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