Industrial and trade policies: A multisectoral model with increasing returns to scale and imperfect competition.

Abstract

The thesis develops a multisectoral model of the Johansen type intended for analyzing industrial and trade policies. The innovations brought by the thesis include (a) increasing returns to scale and imperfect competition, (b) technological progress via the learning curve. The theoretical structure of the mathematical model is developed step by step and in great detail, with a somewhat expanded discussion of the role of the government sector in industrial and trade policies. Using the data from the 19-sector IO Table of Indonesia for the year 1985, we calibrate the mathematical model. The result is a CGE model of Indonesia, coded in FORTRAN, that can be used for many varied policy analyses. With the help of this CGE model, some simulations are carried out to evaluate the quantitative effects of some industrial and trade policies applied on one imperfectly competitive industry. Simulations are also carried out to study the effects of technological change--through the learning curve--on the Indonesian economy for several years.