| Summary: | 碩士 === 國立高雄大學 === 經營管理研究所 === 103 === Although capacity constraint seems quite common to firm operation, little researches in the field of international trade address the effects of firms with capacity constraint. This paper investigates the effects of government’s trading policies on social welfare under domestic capacity constraint.
In the tariff regime, we find that a binding domestic capacity constraint results in higher equilibrium domestic market price and lower social welfare comparing to the non-binding situation. In the quota regime, we show that both of the relieving domestic capacity and releasing quota will increase social welfare. In the tariff-rate quota regime, we prove that lifting either in-quota tariff or over-quota tariff and relieving the constrained domestic capacity will reduce the social welfare. If the domestic capacity constraint is binding, the government can set higher over-quota tariff as a “rent shift” mechanism to shift back foreign producer’s excess profit.
We conclude that binding domestic capacity constraint provides foreign producer opportunity to export more products and then affects domestic social welfare. Capacity constraint just plays the distortion role to manipulate the social welfare results in their purposes.
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