Foreign subsidization and excess capacity |
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Authors: | Bruce A. Blonigen Wesley W. Wilson |
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Affiliation: | aDepartment of Economics, University of Oregon, Eugene, OR, 97403, United States;bNBER, 1050 Massachusetts Avenue, Cambridge, MA 02138, United States |
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Abstract: | The U.S. steel industry has long held that foreign subsidization and excess capacity has led to its long-run demise, yet no one has formally examined this hypothesis. In this paper, we incorporate foreign subsidization considerations into a model based on Staiger and Wolak's (1992) cyclical dumping framework and illustrate testable implications of both cyclical excess capacity and structural excess capacity stemming from foreign subsidization. We then use detailed product- and foreign country-level data on steel exports to the U.S. market to estimate these excess capacity effects. While the full sample results provide evidence of both cyclical and structural excess capacity effects for exports to the U.S. market, these effects are confined to such a narrow range of country–product combinations that it is unlikely that such effects were a significant factor in the fortunes of U.S. steel firms over the past decades. |
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Keywords: | JEL classification: F13 J11 |
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