Optimal Trade And Industrial Policy In Industrial Sector: Empirical Studies Of Color TV Industry

Strategic trade policy analysis is under the assumption of increasing return to scale and imperfect competition. The result of the theory is that governments can improve the national economic welfare by trade policy which alters the strategic relationships between firms. Because it gives a new reason for the governments' interference, economists and governors pay much more attentions to it.In this paper, we will make an empirical study under the assumption of imperfect competition. Our purpose is to find how the trade and industrial policy can affect Chinese Color TV sector. We will focus on two policy tools of government: import tariff and production subsidy, the former can be looked as the tool of trade policy and the latter can be looked as the tool of industrial policy. On one hand, we can argue the hypotheses of strategic trade policy through this study. On the other hand, we can get some information of the policy effects which can help government to make better trade and industrial policy. After reviewing the theoretical and empirical literatures on strategic trade policy, we make a short study on Chinese Color TV sector. Then we makes empirical study. It includes static analysis and dynamic (comparative static) analysis. On static analysis, we study the policy effects in specific year. On dynamic (comparative static) analysis, we study the policy for a long time, to find the policy effects in a dynamic economy.The research results demonstrate the basic hypotheses of strategic trade policy. As the development of Chinese industrial sectors, the aim of governments' interference must be changed. Even so, the present protection level of China is higher than optimal level.