Working Paper Series, Department of Economics, Copenhagen Business School
Skal råvaren i land?
Abstract: Processing ashore of raw materials from the fisheries tend
intuitively to recommend itself because more creation of value added in
this manner should take place in Greenland. However, we observe the
opposite tendency: production is shifted aboard on factory trawlers and
catches are shipped directly to export markets or may be so after
transshipping in e.g. Nuuk. It is shown that this actual development indeed
is the prediction of location economics. In the case of unemployment it may
be optimal to secure raw materials for processing on plants ashore, an aim
that may be achieved via subsidies. The optimality of such policy is
discussed using concepts from cost benefit analysis, and it is demonstrated
how the shadow price of labor has a crucial role. Shifting to the macro
level capacity restrictions on plants and on the labor market are pointed
out. The effect of taking raw material ashore is illustrated with a macro
production function, which is assumed to have a positive marginal product
until the capacity limit is hit. This, however, may take place after the
noninflationary augmenting level of employment has been reached. Finally
the possibility of alternative and better policies than the one relying on
subsidies is touched upon.
Keywords: Greenland; export market; transshipping.; (follow links to similar papers)
JEL-Codes: H00; (follow links to similar papers)
17 pages, August 28, 2006
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