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Protection and International Sourcing

Emanuel Ornelas and John Turner ()

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: We study the impact of import protection on relationship-specific investments, organizational choice and welfare. We show that a tariff on intermediate inputs can improve social welfare through mitigating hold-up problems. It does so if it discriminates in favor of the investing party, thereby improving its bargaining position. On the other hand, a tariff can prompt inefficient organizational choices if it discriminates in favor of less productive firms or if integration costs are low. Protection distorts organizational choices because tariff revenue, which is external to the firms, drives a wedge between the private and social gains to offshoring and integration.

Keywords: International trade; tariffs; hold-up problem; sourcing; organizational form (search for similar items in EconPapers)
JEL-codes: F13 L23 D23 (search for similar items in EconPapers)
Date: 2008-12
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http://cep.lse.ac.uk/pubs/download/dp0900.pdf (application/pdf)

Related works:
Journal Article: Protection and International Sourcing (2012) Downloads
Working Paper: Protection and International Sourcing (2010) Downloads
Working Paper: Protection and international sourcing (2008) Downloads
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