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Related QuestionThe infant industry argument for protectionism is based on which of the following views? a. Foreign buyers will absorb all of the output of domestic producers in a new industry. b. The growth of an industry that is new to a nation will be too rapid unless trade restrictions are imposed. c. Firms in a newly developing domestic industry will have difficulty growing if they face strong competition from established foreign firms. d. It is based on none of the above. What Is the Infant-Industry Theory?The infant-industry theory states that new industries in developing countries need protection against competitive pressures until they mature and develop economies of scale that can rival their competitors'. The infant industry argument is often cited as a rationale for protectionism and was developed by Alexander Hamilton and Friedrich List. Key Takeaways
Understanding the Infant-Industry TheoryThe infant-industry theory is the supposition that emerging domestic industries need protection against international competition until they become mature and stable. In economics, an infant-industry is one that is new and in its early stages of development and, thus, not yet capable of competing against established industry competitors. The infant-industry theory, first developed in the early 19th century by Alexander Hamilton and Friedrich List, is often a justification for protectionist trade policies. The basic idea is that young, emerging industries in underdeveloped nations need protection from more established industries, usually from foreign nations. In response to these arguments, governments may enact import duties, tariffs, quotas, and exchange rate controls to prevent international competitors from matching or beating the prices of an infant industry, thereby giving the infant industry time to develop and stabilize. Special ConsiderationsAccording to a paper in the Journal of International Economics, titled "When and how should infant industries be protected?" the infant-industry theory was later improved on by the economist and philosopher John Stuart Mill, who said that infant industries should only be protected if they can mature and then become viable without protection. Charles Francis Bastable then added a simple condition that the cumulative net benefits provided by the protected industry must exceed the cumulative costs of protecting the industry. Infant-industry theorists argue that industries in developing sectors of the economy need to be protected to keep international competitors from damaging or destroying the domestic infant industry. Infant industries, they argue, don't have the economies of scale that older competitors in other countries may have and should be protected, just until they have built an economy of similar scale. The infant-industry theory holds that once the emerging industry is stable enough to compete internationally, any protective measures introduced, such as tariffs, are intended to be removed. In practice, this is not always the case because the various protections that were imposed may be difficult to remove. Get help with accessInstitutional accessAccess to content on Oxford Academic is often provided through institutional subscriptions and purchases. If you are a member of an institution with an active account, you may be able to access content in one of the following ways: IP based accessTypically, access is provided across an institutional network to a range of IP addresses. This authentication occurs automatically, and it is not possible to sign out of an IP authenticated account. Sign in through your institutionChoose this option to get remote access when outside your institution. Shibboleth / Open Athens technology is used to provide single sign-on between your institution’s website and Oxford Academic.
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Signed in but can't access contentOxford Academic is home to a wide variety of products. The institutional subscription may not cover the content that you are trying to access. If you believe you should have access to that content, please contact your librarian. Institutional account managementFor librarians and administrators, your personal account also provides access to institutional account management. Here you will find options to view and activate subscriptions, manage institutional settings and access options, access usage statistics, and more. What is the main argument of the infant industry theory?The infant-industry theory states that new industries in developing countries need protection against competitive pressures until they mature and develop economies of scale that can rival their competitors'.
What are the main reasons for protecting infant industries?The main rationale behind the infant industry argument is that new industries require protection because they lack the economies of scale that competitors possess. Infant industries lack the capabilities to leverage their existing production and require protection until they can acquire similar economies of scale.
Which of the following is a criticism of the infant industry argument?Criticism. The practice of the infant industry argument is being criticized because the new industries to whom protection is provided become inefficient since they do not face competition from the foreign markets. Also, such protections are difficult to take back once imposed, which is not a good thing.
How do many economists feel about protecting infant industries quizlet?Economists believe the most persuasive argument for protectionism is to protect infant industries. But the argument has a drawback. What is this drawback? Protection lessens the need for firms to become productive enough to compete with foreign firms; this often results in infant industries never "growing up.
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