Contingent protection as better insurance
AbstractWe formalize the notion that GATT exceptions such as antidumping and escape clause actions can act as insurance for import competing sectors affected by adverse price shocks. We use a general equilibrium model with several import competing sectors and assume incomplete markets so that agents cannot contract insurance. We show that these measures are superior to uniform tariffs as insurance mechanisms. Moreover, we demonstrate that the optimal uniform policy may involve a tariff at all, but rather might entail and export tax. We also show that a tax cum subsidy policy (i.e. taxing all sectors in order to subsidize the shocked sector) improves welfare.
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Bibliographic InfoPaper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 49.
Date of creation: 1998
Date of revision:
Other versions of this item:
- Ronald D. Fischer & Thomas J. Prusa, 1999. "Contingent Protection as Better Insurance," NBER Working Papers 6933, National Bureau of Economic Research, Inc.
- Thomas J. Prusa & Ronald D. Fischer, 1999. "Contingent protection as better insurance," Departmental Working Papers 199902, Rutgers University, Department of Economics.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-05-03 (All new papers)
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