Entry Barriers, Exit Option and a Theory of Optimal Obfuscation

Chung Sik Yoo
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Chung Sik Yoo: Yonsei University

Korean Economic Review, 1995, vol. 11, issue 1, 121-134

Abstract: In this paper, a typical gainers-losers influence competition model is modified to introduce uninformed losers who share the loss but are subject to political rhetorics of indirect policies. Under symmetric treatment of tax and subsidy in deadweight loss increase caused by indirect policies, an increase in the degree of policy obfus-cation is found to lead to a decrease in the equilibrium amount of migration under the condition that the average subsidy is greater than the average tax. Whether migration effect (multiplied by the factor) is more likely to provide a negative incentive for policy obfuscation depends on the specification of the optimal solution of entry barriers to gainers group. It is also found that the degree of transfer tends to be negatively related with the degree of policy obfuscation. This simple experiment generated an interesting and important observation; in assessing the political rationales of indirect policies, we should look at at least two more aspects of them, migration and private political response effects, in addition to their direct political economic cost and benefit.

Date: 1995
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