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Protection and international sourcing

Emanuel Ornelas and John Turner ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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: D23 F13 L23 (search for similar items in EconPapers)
Date: 2008-12
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http://eprints.lse.ac.uk/28511/ Open access version. (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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