Steel Safeguards and the Welfare of U.S. Steel Firms and Downstream Consumers of Steel: A Shareholder Wealth Perspective

31 Pages Posted: 20 Jul 2007

See all articles by Benjamin H. Liebman

Benjamin H. Liebman

St. Joseph's University

Kasaundra Tomlin

Oakland University - School of Business Administration

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Abstract

This paper analyses the steel safeguards applied during 2001-3. Results reveal that for shareholders of U.S. steel companies safeguards generated positive 'abnormal' returns of approximately 6%. The cancellation of the safeguards resulted in wealth gains of about 5%. Steel shareholders experienced negative abnormal returns of -5% in response to the WTO ruling that the U.S. had violated WTO law. Our results are consistent with the neoclassical view that producers gain at the expense of consumers. Also, findings indicate that downstream-consuming firms that diversify production in NAFTA countries avert some trade policy risk associated with higher steel costs caused by safeguard protection.

Suggested Citation

Liebman, Benjamin H. and Tomlin, Kasaundra, Steel Safeguards and the Welfare of U.S. Steel Firms and Downstream Consumers of Steel: A Shareholder Wealth Perspective. Canadian Journal of Economics, Vol. 40, No. 3, pp. 812-842, August 2007, Available at SSRN: https://ssrn.com/abstract=1001794 or http://dx.doi.org/10.1111/j.1365-2966.2007.00432.x

Benjamin H. Liebman (Contact Author)

St. Joseph's University ( email )

5600 City Avenue,
Philadelphia, PA 19131
United States

Kasaundra Tomlin

Oakland University - School of Business Administration ( email )

Rochester, MI 48309-4401
United States
248-370-4975 (Phone)

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