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Contingent Protection as Better Insurance

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  • Ronald D. Fischer
  • Thomas J. Prusa

Abstract

We 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 not involve a tariff at all, but rather might entail an 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 Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6933.

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Date of creation: Feb 1999
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Handle: RePEc:nbr:nberwo:6933

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  1. Dixit, Avinash, 1989. "Trade and Insurance with Imperfectly Observed Outcomes," The Quarterly Journal of Economics, MIT Press, vol. 104(1), pages 195-203, February.
  2. Robert W. Staiger, 1994. "International Rules and Institutions for Trade Policy," NBER Working Papers 4962, National Bureau of Economic Research, Inc.
  3. Dixit, Avinash K, 1989. "Trade and Insurance with Adverse Selection," Review of Economic Studies, Wiley Blackwell, vol. 56(2), pages 235-47, April.
  4. Dixit, Avinash, 1987. "Trade and insurance with moral hazard," Journal of International Economics, Elsevier, vol. 23(3-4), pages 201-220, November.
  5. Robert W. Staiger & Frank A. Wolak, 1994. "Measuring Industry Specific Protection: Antidumping in the United States," NBER Working Papers 4696, National Bureau of Economic Research, Inc.
  6. 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.
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Cited by:
  1. Michael D. Bordo & Barry Eichengreen & Douglas A. Irwin, 1999. "Is Globalization Today Really Different than Globalization a Hunderd Years Ago?," NBER Working Papers 7195, National Bureau of Economic Research, Inc.
  2. Chad P. Bown, 2011. "Taking Stock of Antidumping, Safeguards and Countervailing Duties, 1990–2009," The World Economy, Wiley Blackwell, vol. 34(12), pages 1955-1998, December.
  3. Meredith A. Crowley, 2002. "Do safeguard tariffs and antidumping duties open or close technology gaps?," Working Paper Series WP-02-13, Federal Reserve Bank of Chicago.
  4. Meredith A. Crowley, 2003. "An introduction to the WTO and GATT," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 42-57.
  5. Marcel Vaillant & Marcelo Olarreaga, 2011. "Micro and Macro Determinants of trade temporary barriers: the Brazilian case over the last two decades," Documentos de Trabajo (working papers) 0711, Department of Economics - dECON.

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