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GTAP Resource #684

"Can Indonesia Gain from Log Export Barrier?"
by Arunanondchai, May

Upstream-downstream relationship is best represented in a sequential market setting. We use a simple model of successive duopoly to examine the effect of different ownership and industrial structures on firms' output decisions. Thereafter, optimal trade policy responses are simulated for each case. The model provides insights to Indonesian logging and plywood industry; and the appropriate policy responses.

Vertical integration is found to alleviate the need for government intervention because the integrated firm takes into account the effect of the upstream output decision on the downstream market. However, this strategic effect is diluted when the number of integrated firms in the exporting country is greater than one. In this case, government intervention, including log export restrictions, may help to raise welfare through (1) positive terms-of-trade effect and (2) improved strategic co-ordination between the upstream and downstream sector.

Resource Details (Export Citation) GTAP Keywords
Category: 2001 Conference Paper
Status: Published
By/In: Presented at the 4th Annual Conference on Global Economic Analysis, Purdue University, USA
Date: 2001
Version: Preliminary
Created: (5/31/2001)
Updated: Bacou, M. (6/15/2001)
Visits: 1,910
No keywords have been specified.

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