The Employment Maximizing Import Quota Under Domestic Monopoly*

Kaempfer, William H.; Tower, Edward; Willett, Thomas D.

doi:10.24006/jilt.2003.1.1.71

J. Int. Logist. Trade 2003; 1(1):71-83

pISSN: 1738-2122, eISSN: 2508-7592

DOI: https://doi.org/10.24006/jilt.2003.1.1.71

ARTICLE

The Employment Maximizing Import Quota Under Domestic Monopoly*

William H. Kaempfer^**, Edward Tower^***, Thomas D. Willett^****

Author Information & Copyright ▼

¹University of Colorado at Boulder

¹Duke University

¹Claremont McKenna College & Claremont Graduate University

^**Corresponding author: Professor, Department of Economics, University of Colorado at Boulder, USA

^***Corresponding author: Professor, Department of Economic, Duke University, Durham, USA

^****Corresponding author: Professor, Department of Economics, Claremont McKenna College & Claremont Graduate University, USA

© Copyright 2003 Jungseok Research Institute of International Logistics and Trade. This is an Open-Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/4.0/) which permits unrestricted non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited.

Published Online: Dec 31, 2003

ABSTRACT

We consider a domestic monopolist who is protected by an import quota on the product he produces. He faces a domestic demand curve which is characterized by a constant price elasticity. He is unable to export and has an upward sloping marginal cost curve. We demonstrate that in this case his employment of labor rises with the import quota until imports rise to a fraction 1/e of domestic output where e is the elasticity of domestic demand. Thus, the employment maximizing quota sets permissible imports at a fraction of domestic output which is at least as high as the reciprocal of the elasticity of demand. We also make a case for liberalizing all the way right away, “cold turkey liberalization.”