|Title:||PERMANENT vs. TEMPORARY INFANT INDUSTRY ASSISTANCE|
|Authors:||Wright, Donald J.|
|Publisher:||Department of Economics|
|Abstract:||This paper develops a two period model in which a dynamic external economy, in the form of learning-by-doing spillovers, provides the rationale for infant industry assistance are then examined by introducing owner/manager effort into the learning process. It is shown, under conditions of symmetric information, that temporary assistance is optimal. Under conditions of asymmetric information, it is shown that a form of permanent assistance is optimal if the policy maker can commit to a Period 1 per unit output subsidy and a Period 2 lump-sum subsidy contingent on Period 2 output.|
|Type of Work:||Working Paper|
|Appears in Collections:||Working Papers - Economics|
|ECON 1991-164.pdf||6.25 MB||Adobe PDF|
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