Can strengthening the local content requirements meet a government's need to raise industrial productivity and production?. Issue 1 (1st January 2020)

• Record Type: Journal Article
• Authors: Lin, Shiue-Hung; Weng, Yungho
• Is Part Of: Journal of applied economics. Volume 23:Issue 1(2020)
• Page Start: 316
• Page End: 328
• Publication Date: 2020-01-01
• Subjects: Local content requirements -- industrial productivity -- industry production -- firm heterogeneity; Economics -- Periodicals; Economic policy -- Periodicals; Finance -- Periodicals; Economic policy; Economics; Finance; Electronic journals; Electronic journal; Periodicals; 330.05
• DOI: 10.1080/15140326.2020.1753468
• Languages: English
• ISSNs: 1514-0326

Abstract

ABSTRACT: By taking firm heterogeneity in productivity into account in a monopolistic competition market in a general-equilibrium model setting, this paper investigates whether a stricter local content requirements (LCRs) can increase both productivity and production in the domestic intermediate-goods industry. The result shows that stricter LCRs policy cannot simultaneously increase both. The initial level of LCRs plays an important role in policy effectiveness. If it is below a critical level, a stricter LCRs can increase production but decrease productivity; however, production decreases but productivity increases if the initial LCRs are higher than the critical level.