33-class notes

33-class notes - 11/27/2009 TODAY Mon Nov 30- class 33...

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11/27/2009 1 TODAY – Mon Nov 30- class 33 • International Trade (continued) – finish normative reasons for trade – Brander (8 169-183 Brander (8, 169 183) Wed Dec 2 and Fri Dec 4 - Trade policy issues and institutions. - Brander (9, pp 190 -201; 216 - 220). Comm394-Barbara Spencer Office Hours for Exam • Exam – Tues December 15, Scarf 100; doors open at 8 30 am (2 hour exam out by about 11 open at 8.30 am (2 hour exam – out by about 11 am) • Office hours (or by appointment – Friday. Dec 11: 1:30 – 3:00 pm – Mon Dec 14: 10.00am – 11.30; 1:30 – 3:30 pm email: barbara spencer@sauder ubc ca – email: barbara.spencer@sauder.ubc.ca ) Comm394-Barbara Spencer
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2 4. Infant Industry Argument for Protection • May be a gain from temporary protection to give certain industries time to catch up with the give certain industries time to catch up with the foreign competition. – Firms may make steep losses as they "learn by doing". – e.g. Japan’s protection of cars, consumer electronics and semiconductors after WW II may have been a successful infant-industry strategy. Comm394-Barbara Spencer • But, once an industry is protected, it is often very hard to remove the protection – the infants never grow up. Why is government intervention needed? • If the industry is expected to be successful, private finance should be available. Basic poin : need some kind of market failure to Basic point : need some kind of market failure, to justify infant industry protection. Market failure due to asymmetric information . – Potential lenders typically have less information about likely success of the business than entrepreneurs starting a business too little venture capital finance But is import protection the best way to solve this But is import protection the best way to solve this market failure? – An alternative would be subsidies to the venture
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33-class notes - 11/27/2009 TODAY Mon Nov 30- class 33...

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