Industrial Policy and the Shaping of Local Preferences
Abstract:
Industrial policy might enhance welfare i f trade does not happen among competitive economies and/or if there are pot ential dynamic economies of scale or consumer learning to be accounted for. We study the case of Spain where policymakers favored foreign entry of aut omakers from the very beginning of the automobile industry. Using rich, pro vince-level, market share data going back to the dawn of the Spanish automo bile industry we show that entry of a foreign manufacturer triggers a sudde n but long-lasting increase in national sales, which is always stronger in the local market where the new assembly plant is located. The national home market advantage disappears quickly after Spain joins the EU in 1986. Howe ver, intranational home bias, while smaller in magnitude, strengthens over time. We then estimate an equilibrium, discrete choice demand model of hori zontally differentiated products and an oligopolistic supply to show that t he remaining home market advantage originated by an industrial policy desig ned in the autarkic 1950s still amounts to a significant protection of the Spanish domestic market: the equivalent of a 26% tariff against non-Europea n imported vehicles, and a 45% against all models not produced in Spain, co mpared to a nominal import tariff into the European Union of 10.5%.
DTSTAMP:20260428T105556Z DTSTART:20230927T130000Z DTEND:20230927T140000Z SEQUENCE:0 TRANSP:OPAQUE END:VEVENT END:VCALENDAR