The impact of direct trade controls and an overvalued exchange rate on factor proportions in manufacturing

Bibliographic Data

ID20303032
AuthorsDavid Julian Klock (United States Department of the Treasury, corresponding author)
Year1972
Volume8
Issue4
Pages447-458
Publication date1972-07-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueThe Journal of Development Studies (JOURNAL)
Journal identifiersISSN: 0022-0388 • E-ISSN: 1743-9140
PublisherInforma UK Limited (PUBLISHER • GB)
DOI10.1080/00220387208421425
OpenAlexW1983729576
LanguageEN
Citations received2
References cited4

This paper is an analysis of certain aspects of manufacturing development under a regime of import and foreign exchange controls, where such controls are accompanied by an overvalued exchange rate. The analytical framework is a modification of the ‘effective rate of protection’ analysis. The argument proceeds from the fact that the overvalued rate represents a subsidy on imported capital equipment and intermediate goods. Two implications are drawn from the analysis. First and most important, the subsidy on imported intermediate goods will exacerbate the oft‐noted tendency of import‐substitute industry to take the form of ‘processing and packaging’ operations with minimal domestic value added. Second, the subsidy on imported capital equipment will give entrepreneurs an incentive to substitute imported capital equipment for domestic labour

Business · Capital (architecture) · Capital good · Economics · Exchange rate · Export subsidy · Goods and services · Incentive · International economics · International trade · Market economy · Microeconomics · Monetary economics · Subsidy · Value (mathematics) · Global trade and economics

Tools

Open DOISci-Hub