PSCI 152 Lecture Notes - Lecture 4: Solar Panel, Pharmaceutical Industry, Solyndra
12 Dec 2016
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Document Summary
Chapter five: a state centered approach to trade politics. Society-centered approach suggests we look at the political influence of the industries concerned: argues protectionism reduces social welfare by depriving society of the gains of trade, national policy reflects the balance of power among competing interest groups. Assumptions: under certain circumstances, trade protection can raise social welfare, under specific circumstances, governments are relatively unconstrained by interest-group demands. Industry may not be efficient in short run, but could be in long run because . Tariff is rarely the best policy response to the central problem the infant industry confronts. Subsidies are more efficient because they still help domestic industries cover the gap between its production costs and established foreign producers" costs, but don"t reduce consumer welfare like tariffs do. Firms may be reluctant to borrow from private markets when the problems rises from economies of experience. Strategic trade theory expands on the basic insight of the infant- industry case for protection.
