Economics%20116%20-%20Lecture%208%20-%20Final

Economics%20116%20-%20Lecture%208%20-%20Final - Economics...

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Economics 116: Economic Development UC San Diego, Spring 2009 Prof. Karthik Muralidharan Department of Economics Lecture 8
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Administrative Stuff Graded midterms to be distributed after class We have created a very detailed grading rubric to explain the concepts and grading principles in detail (already on the course web page) Two purposes of the rubric A teaching document (pay close attention) Complete transparency on objectives and grading Think HARD before requesting a re-grade In most cases, your grade will go down Median score was 37/75 (around 50%) Rough grade distribution: 44 and over: A-/A 33 – 43: B-/B/B+ 23 – 32: C-/C/C+ 22 and below: D+ and below TA Assignments (based on student last name): A – J: Aaron Schroder; K – N: Hee-Seung Yang; O – Z: Juanjuan (JJ) Meng
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Lecture Outline (4/23/09) Import Substitution Foreign Contact, Technology Transfer, and FDI Three views on trade and development
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Review of Theory Why Import Substitution? To protect infant industries Who are less competitive when they start out (hence “infant”) and have high per unit costs, because they have not had any “learning by doing” Providing protection from competition can (in theory) allow companies to experience a “learning curve”, reduce costs, and then become competitive So the idea of “import substitution” is to provide temporary protection to infant industries to let them grow Multiple ways of doing this in practice Tariffs, quotas, and other restrictions on imports Production subsidies for domestic firms Which one is more efficient? (Bardhan, 1971)
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Q P S : Domestic supply D : Domestic demand O Closed Economy P* Q* CS PS
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Q P S : Domestic supply D : Domestic demand P w O Free Trade Q 1 Q 2 Domestic Production Import CS PS
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Q P S : Domestic supply
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