A two-country trade model with production uncertainty is considered. If complete contingent markets do not exist, it is desirable for governments to adopt some trade policies to share the production risk. A full-information policy involves incomes transfers across co untries, which can be achieved by equal import tariffs and export sub sidies. With incomplete information, the author considers incentive c ompatible trade policies, which are designed to be truth revealing wh ile partially sharing the production risk. In this case, the tariff i n one country may differ from the export subsidy abroad. Copyright 1987 by The editors of the Scandinavian Journal of Economics.
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