Policy Analysis with a Simple Model with Oligopoly, Increasing Returns and a Dual Role Agricultural Sector. An Application to the Argentine Experience.

The main goal of this paper is simple: to emphasize the ambiguities of policy analysis when we departure from the standard competitive model as a point of reference. After reviewing the most salient features of the fiscal history of Argentina's industrial development, a simple static model is used to analyze the possible effects of a reversal in traditional fiscal policies, that is, a change from industry subsidies and industry protection to subsidies reduction and economic openness. By working with a model that incorporates some basic features of the Argentinean economy -oligopoly and increasing returns in a protected and subsidized industrial sector, and an agricultural sector producer of the main export-goods which are, at the same time, the principal components of the consumption bundle of the labor force- the ambiguities in net outcomes that have to be expected from the policy reorientation above mentioned are briefly analyzed.