Thursday 21 July 2016

Prefer local or foreign goods?

Some local goods are more expensive than similar imports. For example, in Japan, most of the locally produced goods have higher prices than imported products. when imports have the cost of transporting and tariffs, with the same productivity and cost of production, local goods should be cheaper than imports. However, sometimes the local companies could have higher costs of production, including labour and raw material costs. This makes local products more expensive. Moreover, in some regions, people trust local companies, as they may know the owners of the local companies or the local companies have a long history that they have served for several generations. The values of trust and brand add to the prices, thus the local goods become more expensive. In addition, the local companies may have relatively smaller sizes so they could have lower productivities due to the economies of scale. Overall, I think that local products have to have all of the above characters or even more in order to maintain their market shares with higher prices.

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