Quantity Controls, License Transferability, and the Level of Investment
IMF Working Papers, December 1, 2001
Source details
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- Quantity Controls, License Transferability, and the Level of Investment
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Bibliographic details
- Authors: Ling Hui Tan, Kala Krishna, Ram Ranjan
- Published: December 1, 2001
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451874600.001
Model and setup
- Models investment/entry decisions in a competitive industry subject to a quantity control on an input for production.
- Quantity control is implemented by auctioning licenses for the restricted input (examples given: a pollution permit or a production license).
Main findings
- Liberalizing the quantity control could reduce investment in the industry under certain circumstances.
- The level of investment differs substantially when licenses are tradable versus when they are not.
Key factors influencing outcomes
- The elasticity of demand for the final good.
- The degree of input substitutability.
Illustrative material
- Two examples are computed to illustrate the theoretical results.
Thematic subjects and keywords
- Subjects: Agroindustries, Asset prices, Commodity markets, Demand elasticity, Economic sectors, Economic theory, Financial markets, Prices, Production, Productivity.
- Keywords: Agroindustries, Asset prices, Commodity markets, Demand elasticity, entry, industry output, investment, license input, license price, licensing, mover accent, output effect, product price, production function, Productivity, productivity shock, Quotas, tradable quotas, transferability, WP.
Working Paper by Ling Hui Tan, Kala Krishna, and Ram Ranjan; December 1, 2001.
Content in this bundle
- Wp/01/206 Cor. 2/1/02