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Intersectoral adjustment and policy intervention: the importance of general-equilibrium effects

Intersectoral adjustment and policy intervention: the importance of general-equilibrium effects
Intersectoral adjustment and policy intervention: the importance of general-equilibrium effects
We model adjustment costs in a general-equilibrium setting using a “transport sector.” This sector provides services needed to reallocate a factor of production across two other sectors. A market imperfection in the transport sector causes adjustment to occur too slowly in the absence of government intervention. The government has a restricted menu of second-best policies to remedy this imperfection. Given this restricted menu, the optimal policy choice depends on the government's ability to make commitments. The key to these results is our replacement of the black box of adjustment costs with an explicit model of these costs.
0965-7576
330-355
Karp, Larry
c0e2efad-f4e6-4fb9-9630-aaa8cf37b72e
Paul, Thierry
0a1ee80f-951d-428e-914a-e674f006b757
Karp, Larry
c0e2efad-f4e6-4fb9-9630-aaa8cf37b72e
Paul, Thierry
0a1ee80f-951d-428e-914a-e674f006b757

Karp, Larry and Paul, Thierry (2005) Intersectoral adjustment and policy intervention: the importance of general-equilibrium effects. Review of International Economics, 13 (2), 330-355. (doi:10.1111/j.1467-9396.2005.00507.x).

Record type: Article

Abstract

We model adjustment costs in a general-equilibrium setting using a “transport sector.” This sector provides services needed to reallocate a factor of production across two other sectors. A market imperfection in the transport sector causes adjustment to occur too slowly in the absence of government intervention. The government has a restricted menu of second-best policies to remedy this imperfection. Given this restricted menu, the optimal policy choice depends on the government's ability to make commitments. The key to these results is our replacement of the black box of adjustment costs with an explicit model of these costs.

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Published date: 2005

Identifiers

Local EPrints ID: 39695
URI: https://eprints.soton.ac.uk/id/eprint/39695
ISSN: 0965-7576
PURE UUID: 5b57cf8f-a36b-4b5e-9b6c-7a4f3c71ceab

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Date deposited: 29 Jun 2006
Last modified: 17 Jul 2017 15:35

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