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Optimal Trade Policies for a Developing Country under Uncertainty

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Author Info
E. Kwan Choi
Harvey E. Lapan

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Abstract

This paper investigates optimal trade policies for a developing, small open economy that faces international price uncertainly. Trade taxes are used to finance provision of a public good, which enters the utility function of consumers. If demands for private goods are independent of the public good, the optimal composite tariff dominates the optimal quota. If the optimal state-contingent tariff increases with the foreign price, the optimal specific tariff also dominates the optimal quota, regardless of risk aversion. However, the ranking of the optimal specific tariff and the optimal quota generally depends on risk attitudes as well as ordinal preferences.

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Publisher Info
Paper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 90-gatt8.

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Date of creation: Jul 1991
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Handle: RePEc:ias:cpaper:90-gatt8

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Young, Lealie, 1980. "Tariffs vs . Quotas under Uncertainty: An Extension," American Economic Review, American Economic Association, vol. 70(3), pages 522-27, June. [Downloadable!] (restricted)
  2. Cassing, James H. & Hillman, Arye L., 1985. "Political influence motives and the choice between tariffs and quotas," Journal of International Economics, Elsevier, vol. 19(3-4), pages 279-290, November. [Downloadable!] (restricted)
  3. Batra, Raveendra N & Naqvi, Nadeem, 1987. "Urban Unemployment and the Gains from Trade," Economica, London School of Economics and Political Science, vol. 54(215), pages 381-95, August. [Downloadable!] (restricted)
  4. Robin Boadway & Shlomo Maital & Martin Prachowny, 1973. "Optimal Tariffs, Optimal Taxes and Public Goods," Working Papers 120, Queen's University, Department of Economics.
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  5. Anderson, James E & Riley, John G, 1976. "International Trade with Fluctuating Prices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(1), pages 76-97, February. [Downloadable!] (restricted)
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  6. Rogerson, William P, 1980. "Aggregate Expected Consumer Surplus as a Welfare Index with an Application to Price Stabilization," Econometrica, Econometric Society, vol. 48(2), pages 423-36, March. [Downloadable!] (restricted)
  7. Choi, Eun Kwan & Johnson, Stanley R, 1987. "Consumer's Surplus and Price Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(2), pages 407-11, June. [Downloadable!] (restricted)
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  8. Feehan, James P., 1988. "Efficient tariff financing of public goods," Journal of International Economics, Elsevier, vol. 25(1-2), pages 155-164, August. [Downloadable!] (restricted)
  9. Vanek, Jaroslav, 1971. "Tariffs, Economic Welfare and Development Potential," Economic Journal, Royal Economic Society, vol. 81(324), pages 904-13, December. [Downloadable!] (restricted)
  10. Jonathan Eaton & Gene M. Grossman, 1985. "Tariffs as Insurance: Optimal Commercial Policy When Domestic Markets Are Incomplete," NBER Working Papers 0797, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Staiger, Robert W & Tabellini, Guido, 1987. "Discretionary Trade Policy and Excessive Protection," American Economic Review, American Economic Association, vol. 77(5), pages 823-37, December. [Downloadable!] (restricted)
  12. Turnovsky, Stephen J & Shalit, Haim & Schmitz, Andrew, 1980. "Consumer's Surplus, Price Instability, and Consumer Welfare," Econometrica, Econometric Society, vol. 48(1), pages 135-52, January. [Downloadable!] (restricted)
  13. Eaton, Jonathan & Panagariya, Arvind, 1979. "Gains from trade under variable returns to scale, commodity taxation, tariffs and factor market distortions," Journal of International Economics, Elsevier, vol. 9(4), pages 481-501, November. [Downloadable!] (restricted)
  14. Young, Leslie & Anderson, James E, 1980. "The Optimal Policies for Restricting Trade under Uncertainty," Review of Economic Studies, Blackwell Publishing, vol. 47(5), pages 927-32, October. [Downloadable!] (restricted)
  15. Rodriguez, Carlos Alfredo, 1974. "The non-equivalence of tariffs and quotas under retaliation," Journal of International Economics, Elsevier, vol. 4(3), pages 295-298, August. [Downloadable!] (restricted)
  16. Weitzman, Martin L, 1974. "Prices vs. Quantities," Review of Economic Studies, Blackwell Publishing, vol. 41(4), pages 477-91, October. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Choi, E. Kwan & Feinerman, Eli, 1995. "Regulation Of Nitrogen Pollution: Taxes Versus Quotas," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(01), July. [Downloadable!]
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