TY  - JOUR
AU  - Blonigen,Bruce A.
AU  - Liebman,Benjamin H.
AU  - Wilson,Wesley W.
TI  - Trade Policy and Market Power:  The Case of the US Steel Industry
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13671
PY  - 2007
Y2  - December 2007
UR  - http://www.nber.org/papers/w13671
L1  - http://www.nber.org/papers/w13671.pdf
N1  - Author contact info:
Bruce Blonigen
Department of Economics
1285 University of Oregon
Eugene, OR 97403-1285
Tel: 541/346-4680
Fax: 541/346-1243
E-Mail: bruceb@uoregon.edu

Benjamin H. Liebman
Department of Economics
Saint Joseph's University
5600 City Avenue
Philadelphia, PA 19131-1395
E-Mail: bliebman@sju.edu

Wesley Wilson
Department of Economics
1285 University of Oregon
Eugene, OR 97403-1285
E-Mail: wwilson@uoregon.edu
AB  - A primary function of trade policy is to restrict imports to benefit the targeted domestic sector.  However, a well-established theoretical literature highlights that the form of trade policy (e.g., quotas versus tariffs) can have a significant impact on how much trade policy affects firms’ abilities to price above marginal cost (i.e., market power).  The US steel industry provides an excellent example to study these issues, as it has received many different types of trade protection over the past decades.  We model the US steel market and then use a panel of data on major steel products from 1980 through 2006 to examine the effects of various trade policies on the steel market.  We find that the US steel market is very competitive throughout our sample with the exception of the period in which they received comprehensive voluntary restraint agreements (i.e., quotas) and were able to price substantially above marginal cost.  All other forms of protection were in tariff form and had little effect on market power, consistent with prior theoretical literature on the nonequivalence of tariffs and quotas.  We also find evidence that market power eroded over time in steel products where mini-mill producers gained sizeable market share, highlighting the role of technology in the market as well.
ER  -