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Tariffs as Insurance: Optimal Commercial Policy When Domestic Markets Are Incomplete / Jonathan Eaton, Gene M. Grossman.
- Format:
- Book
- Author/Creator:
- Eaton, Jonathan.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w0797.
- NBER working paper series no. w0797
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Tariffs as Insurance
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1981.
- Summary:
- Free trade is not optimal for a small country that faces uncertain terms of trade if some factors are immobile - ex post, and markets for contingent claims are incomplete. The government can improve social welfare by using commercial policy that serves as a partial substitute for missing insurance markets. Using a combination of analytical and simulation techniques we demonstrate that optimal policy for this purpose will often have an anti-trade bias. We also show that the usual preference by economists for factor or product taxes and subsidies over tariffs and export subsidies may not be justified in this context.
- Notes:
- Print version record
- November 1981.
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