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Correcting Trade Distortions in a Small Open Economy

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  • Lahiri, Sajal
  • Raimondos, Pascalis

Abstract

This paper considers the second-best strategy of correcting a wide variety of trade distortions in a small open economy with perfect competition in all markets. Using the tools of duality, we obtain some general properties of the structure and the levels of the optimal tax/subsidy rates. The paper also analyzes the welfare effects of unilateral piecemeal trade policy reforms when some of the quota distortions--imposed by the foreign countries--are unalterable. It is shown that the merits of unilateral trade policy reforms that are emphasized in the literature crucially depend on the absence of unalterable foreign imposed quotas. Copyright 1996 by Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 4 (1996)
Issue (Month): 3 (October)
Pages: 287-99

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Handle: RePEc:bla:reviec:v:4:y:1996:i:3:p:287-99

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576

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Cited by:
  1. Sajal Lahiri & Anjum Nasim, 2005. "Commercial Policy Reform in Pakistan: Opening up the Economy under Revenue Constraints," International Tax and Public Finance, Springer, vol. 12(6), pages 723-739, November.
  2. Lahiri, Sajal & Nasim, Anjum & Ghani, Jawaid, 2000. "Optimal second-best tariffs on an intermediate input with particular reference to Pakistan," Journal of Development Economics, Elsevier, vol. 61(2), pages 393-416, April.
  3. J. Peter Neary, 2007. "Simultaneous Reform of Tariffs and Quotas," Review of International Economics, Wiley Blackwell, vol. 15(1), pages 37-44, 02.
  4. Turunen-Red, Arja H. & Woodland, Alan D., 2000. "Multilateral policy reforms and quantity restrictions on trade," Journal of International Economics, Elsevier, vol. 52(1), pages 153-168, October.

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