Oligopolistic manufacturing and economic reform in four archetype western pacific economies: model construction and analysis

Abstract

To examine the effects of policy intervention in the presence of imperfect competition in manufacturing, general equilibrium models are constructed of four Western Pacific economies, chosen according to their level of development and the comparative sizes of their manufacturing sectors. The countries chosen are Australia, an industrialised importer of manufactures, Japan, an industrialised exporter, the Philippines, a developing importer, and the Republic of Korea, a developing exporter. In each case the manufacturing sector is characterised as comprising nine separate industries, each with identical oligopolistic firms producing homogeneous goods which are differentiated from competing imports. The economies are subjected to exogenous shocks, which include trade reforms, increased surveillance of pricing behaviour, technological change and shifts in the terms of trade. Differences in the simulated economic responses in each case are examined and discussed. This paper also offers a complete specification of the model used and a detailed description of the construction of databases for the four countries.