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Consumption efficiency hypothesis and the optimality of free trade policy in a small open economy

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Author Info
Chaudhuri, Sarbajit
Banerjee, Dibyendu

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Abstract

The paper is designed to examine the optimality of the free trade policy in a small poor economy incorporating the consumption efficiency hypothesis in the simple two-by-two Heckscher-Ohlin-Samuelson (HOS) framework. It finds that the protectionist policy in the form of a tariff on the capital-intensive import-competing sector may improve social welfare and unambiguously raise the economy-wide effective employment.

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File URL: http://mpra.ub.uni-muenchen.de/4369/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4369.

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Date of creation: 12 Jul 2007
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Handle: RePEc:pra:mprapa:4369

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Related research
Keywords: Consumption efficiency hypothesis Optimality of free trade Protectionist policy Heckscher-Ohlin-Samuelson model Effective employment.

Find related papers by JEL classification:
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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  1. Bose, Gautam, 1996. "Agrarian efficiency wages in a dual economy," Journal of Development Economics, Elsevier, vol. 49(2), pages 371-386, May. [Downloadable!] (restricted)
  2. Harvey Leibenstein, 1958. "Underemployment in Backward Economies: Some Additional Notes," Journal of Political Economy, University of Chicago Press, vol. 66, pages 256. [Downloadable!] (restricted)
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This page was last updated on 2008-11-17.

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