OCR 2888 - June Case Study - Broad Themes

This is the first in a series of blog posts relating to the OCR A2 Economics Case Study, Economics in a European Context. This summer the pre-release case study materials focus on the EU automotive industry and many of the economic and environmental issues that link to this important industrial sector. I have been working on our toolkit for this paper (due out in a few days) and below I have tried to capture some of the broad themes that I feel are covered by the case study materials. Please do add your own ideas through the blog!

(i) Global shifts in car production – the economic factors affecting the location of car plants and other parts of the automobile supply chain. The rise of Asian-Pacific and eastern European car output

(ii) Internal and external economies of scale in car manufacturing and the effects on consumers and producers – do lower costs feed through to consumers in lower prices

(iii) The direct and indirect employment effects of trends in output in the car sector – multiplier and accelerator effects

(iv) De-industrialisation in the Western European car industry – causes and consequences of long term decline in vehicle production in advanced European nations

(v) Market concentration and leading brands and barriers to entry in different countries – does market power affect prices paid by consumers?

(vi) Incentives for car manufacturers to engage in mergers, takeovers and joint ventures – rationalisation in the industry and the costs and benefits of research and development

(vii) Enlargement of the European Union and factors influencing foreign direct investment flows within the EU. Why have countries such as the Czech Republic and Slovakia become important hubs for automobile production in Europe?

(viii) Price differentials within the car industry – what factors explain price dispersion? Is there evidence of price discrimination by producers?

(ix) The changing market demand for new vehicles in the EU

(x) Nature and causes of market failure: The environmental impact of growing car ownership and car use – externalities and market failure and the arguments for and against government intervention

(xi) Economic impact of foreign direct investment – the macroeconomic effects of investment in the automotive industry and the risks of over-dependence on one industry.

(xii) Competitiveness of EU car producers in the global economy – will meeting tougher pollution standards damage their future prospects?

(xiii) Incentives for producers to engage in research and development – supply side innovation is critical to reducing CO2 emissions from cars but inadequate property rights can prevent automotive investors reaping the full return to new ideas. Businesses need the incentive to take the risk of sinking costs into research projects

(xiv) Corporate social responsibility – how much responsibility should car manufacturers take for the pollution created by the vehicle industry? Who should pay for pollution abatement?

(xv) Options for government intervention in the vehicle industry to correct for market failure (including the internalisation of negative externalities) and the risks of government failure

(xvi) De-carbonisation of road transport – can the industry de-couple growth in sales and production from its environmental impact?

(xvii) Economic efficiency and equity issues for different forms of government intervention – who pays for greener cars?