bemisallocatedtocountrieswithinferiortechnologyandhighercosts.Thiscanhappenifahighcostinefficientcountrygetstomovedownitsaveragecostcurvefirst,ingthelowcostglobalproducerandacquiring"ruling"costadvantage.Eventhoughothercountriesarepotentiallymoreefficient,theyarelockedoutbythefirstcountry'sheadstartmovingdownitsaveragecostcurve.(3)Anotherexampleisifsomeindustriesearnhigherprofitmark-ups.Inthatcase,countrieswillhaveanincentivetowrestcontrolofthoseindustriesinordertoearnthehighermark-ups.Moreover,evencountrieswithstrictlyhigheraveragecostcurvesmayhaveanincentivetowrestcontroldespitethefacttheyarelessefficient.GiventhepresenceofIRTS,plishsuchatransferifgovernmenttemporarilyprovidesassistancethatmovesdomesticproducersdowntheircostscheduletoestablishrulingcostadvantage--asshownearlierinFigure1.
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