Author

CHIA-YON CHEN

Date of Graduation

1984

Document Type

Dissertation/Thesis

Abstract

There is a growing concern over the impact of critical mineral supply restrictions on the economies of mineral importing nations such as Taiwan. The objective of this dissertation is to build a framework that can be used to analyze the impact of a supply restriction and that can be used to formulate an optimal adjustment pattern for a national economy. The study contains several important advances over previous studies of the impact of a commodity supply restriction. First, the model presented here generalizes I-O analysis via a linear programming (LP) framework in order to simultaneously handle the production function and the allocation function. Second, substitution among related commodities, as estimated by a translog production function, is incorporated into the activity analysis in order to include a part of the price induced effect. Third, the model is able to calculate the optimal adjustment pattern subject to practical constraints. This is of great importance to policy makers, because the assessment of the sensitivity of each sector to a supply restriction and the formulation of practical adjustments are among their major concerns. The study yields several important conclusions: First, the models developed and tested in Chapter III, IV, VI, VII and VIII each have their strengths and weaknesses. However, as a group they have proven reasonably good in their ability to show the impact of a supply restriction and to present an optimal response. Second, even if the elasticity of substitution between aluminum and copper is very low, an impact analysis that omits the substitution effect would still significantly overestimate the impact of a supply restriction. Third, both consumers' surplus analysis and the "supply-driven" I-O model may overestimate the impact in the case of a mild supply restriction, and underestimate the impact in the case of a severe supply restriction. Fourth, the LP model presented in Chapter VII is better able to provide the accurate results in analyzing the impact of a supply restriction since it is a general equilibrium solution. Its results also reflect the conceptual discontinuity of supply restriction impacts. Fifth, the allocation function derived from the optimal solution is a very important innovation, since it allows policy-makers to readily construct an optimal adjustment strategy.

Share

COinS