Economics Dictionary of ArgumentsHome
| |||
|
| |||
| Infant industry: An infant industry is a new industry in its early stages of development that is not yet competitive with established foreign industries. Proponents of the "infant industry argument" suggest that such industries need temporary government protection (e.g., tariffs, subsidies) to allow them to mature, achieve economies of scale, and eventually compete globally without assistance. See also Subsidies, Tariffs._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
| Author | Concept | Summary/Quotes | Sources |
|---|---|---|---|
|
Robert C. Feenstra on Infant Industry - Dictionary of Arguments
Feenstra I 7-43 Infant Industry protection/Feenstra: Our discussion of (…) tariffs (…) suggests a case where protection may have allowed the domestic industry to avoid bankruptcy. >Tariffs, >Dumping. Without arguing that this was definitely the case, let us use this as a possible example of “infant industry” protection. Theoretically, infant industry protection is said to occur when a tariff in one period leads to a sufficient increase in output, and therefore a reduction in future costs, that the firm survives, whereas otherwise it would not. This is a very old idea, dating back to Hamilton (1791)(1), List (1856)(2) and Mill (1909)(3).* >J. St. Mill, >F. List. An essential assumption of the infant industry argument is that the firm needs to earn positive profits each period to avoid bankruptcy. That is, there must be some reason that the capital market does not allow the industry to cover current losses by borrowing against future profits. A model of infant industry protection is developed by Dasgupta and Stiglitz (1988)(4), and more recent treatment is in Melitz (2002)(5). A historical example to the U.S. steel rail industry is provided by Head (1994)(6). Marginal costs: An infant industry is an example of declining marginal costs, i.e. when the future marginal costs are a decreasing function of current output. When marginal costs are declining, however, then there may be additional scope for “strategic” trade policies. Feenstra I 7-44 Krugman (1984)(7) uses a model of declining marginal costs to argue that import promotion might act as export promotion: that protecting an import industry today might turn it into an export industry tomorrow. This intriguing idea is investigated for the production of random access memory chips by Baldwin and Krugman (1988a)(8), (…). Cf. >Dumping/Feenstra. 1. Hamilton, Alexander, 1791. Report on Manufactures. Reprinted in U.S. Senate Documents, vol. XXII, no. 172. Washington: Congress, 1913. 2. List, F., 1856. National System of Political Economy. Translated by G.A. Matile. Philadelphia: Lippincott. 3. Mill, John Stuart, 1909. The Principles of Political Economy. London: Longmans, Green. 4. Dasgupta, P. and Joseph Stiglitz, 1988, “Learning-by-doing, Market Structure andIndustrial and Trade Policies,” Oxford Economic Papers, 40, 246-268. 5. Melitz, Marc, 2002, “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity,” NBER working paper no. 8881. 6. Head, Keith C., 1994, “Infant Industry Protection in the Steel Rail Industry,” Journal of International Economics, 37(3/4), November, 141-166. 7. Krugman, Paul R., 1984, “Import Protection as Export Promotion: International Competition in the Presence of Oligopoly and Economics of Scale,” in Henryk Kierzkowski, ed. Monopolistic Competition and International Trade. Oxford: Oxford University Press. Reprinted as chapter 4 in Gene M. Grossman, 1992, Imperfect Competition and International Trade. Cambridge: MIT Press. 75-86. 8. Baldwin, Richard E. and Paul R. Krugman, 1988a, “Market Access and International Competition: A Simulation Study of 16K Random Access Memories,” in Robert C. Feenstra, ed. Empirical Methods for International Trade. Cambridge: MIT Press. Reprinted as chapter 10 in Gene M. Grossman, 1992, Imperfect Competition and International Trade. Cambridge: MIT Press, 177-200._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Feenstra I Robert C. Feenstra Advanced International Trade University of California, Davis and National Bureau of Economic Research 2002 |
||
Authors A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Concepts A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
