Computer simulation research for Infant Industry Theory based on Repast Simphony

Abstract

Through analyzing logical defects of Friedrich List’s infant industry theory, this paper obtains two hypothesis. One is that no industry is with single product portfolios, and so it is difficult for the developed countries defeating under-developed countries’ infant industry completely according to the comparative advantage theory. This implies that under-developed country could obtain more survival opportunities if it leverages appropriate product diverse strategies. The other hypothesis is protecting infant industry by tariff barriers would increase the cost of whole society, which slows down the development of infant industry, and that damaging interests of both backward country and powerful country. We construct a computer simulation model on Repast Simphony platform to verify the above two hypothesizes, and our simulation results show that the above two hypotheses make sense. We also got an unexpected result that it will lead to significant decline of the yield of the infant industry if one country in the trade exerts tariff barriers, meanwhile, the yield of the other countries will also decline but the decreased amount of the infant industry of the under-developed country obviously exceed the developed country, which means the trade protection damages both side of trade and the underdeveloped country get more injury. That implies the assumption of the tariff barriers protecting and accelerating the development of infant industry does not make sense.