Can Indonesia Gain from Log Export Barriers?

May Arunanondchai

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: We use a model of sequentialduop oly to examine the effect of verticalo wnership structure on firms’ outputs and profit shares in the internationalmark et for raw and processed tropicaltim ber products. The modelpro vides insights that can be applied to the Indonesian logging and plywood industry; shedding light on the appropriate policy responses. We find that when industries are integrated, the government should subsidise both exports. Thus, despite log and plywood being strategic substitutes, log export barriers make Indonesia worse off. When industries are separated, however, plywood exports should be subsidised but the optimal trade policy on log exports depends on two effects. If the commitment failure effect (as in Brander and Spencer (1985)) dominates then log exports should be subsidised, however, if the negative cross-industry effect dominates then log exports should be taxed.

Keywords: Trade with imperfect competition; Verticalin tegration; Forest products (search for similar items in EconPapers)
JEL-codes: D43 F19 L22 L73 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:619

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