Working Paper: CEPR ID: DP2080
Authors: John Bennett; Saul Estrin; Paul Hare
Abstract: The behaviour of an oligopolistic industry in a transition economy is analysed, assuming that the firms are labour-managed and the economy is open to international trade. The output of these firms is assumed to be of lower quality than the output of Western firms. Cournot equilibrium in the presence of bottlenecks is derived. Such bottlenecks may be particularly damaging because firms respond by cutting exports disproportionately. This may explain why countries, such as those in the former Soviet Union, which have faced serious supply bottlenecks have failed to develop exports while the economies of Central Europe, where materials are more freely available, have seen rapid export growth.
Keywords: transition; labour management; cournot; oligopoly; exports
JEL Codes: D21; P31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| material supply bottlenecks (Q31) | export performance (F17) |
| material supply bottlenecks (Q31) | domestic production (D20) |
| domestic production (D20) | export performance (F17) |