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 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 InfoPaper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 199902.
Date of creation: 01 Feb 1999
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antidumping; contingent protection; insurance;
Other versions of this item:
- Ronald D. Fischer & 1998, 1998. "Contingent protection as better insurance," Documentos de Trabajo 49, Centro de Economía Aplicada, Universidad de Chile.
- Ronald D. Fischer & Thomas J. Prusa, 1999. "Contingent Protection as Better Insurance," NBER Working Papers 6933, National Bureau of Economic Research, Inc.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
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