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摘要
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In developing countries, governments often have
direct or indirect control over domestic production in order to develop or
protect their immature domestic industries. We investigate the welfare
effects of such a production-control policy when domestic firms are faced
with free entry of foreign firms. For the production-control policy, we
consider that the government induces domestic firms to commit to targeted output
levels before the foreign entry, and explore how effectively such a
government-induced production commitment works in terms of domestic social
welfare by comparing it to the welfare-maximizing import-tariff policy. We
show that when the products of firms are homogeneous, the production-control policy
always yields higher domestic welfare than the import-tariff policy, even if
the government using production control aims to maximize domestic industry
profits rather than overall domestic welfare.
In addition, we consider the case of
differentiated products and show that the superiority of production control
crucially depends on the degree of product differentiation.
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