Tariff Reform in the Presence of Sector-Specific Distortions
The problem of choosing second-best trade policies is modified by including sector-specific policies as well as tariffs. Formulae for the optimal tariff and sector-specific subsidy are derived and used to study the design of optimal policy menus. The theory is applied to a computable general equilibrium model of the U.S. economy that emphasizes agriculture. The model suggests that nonagriculture distortions do not provide a second-best argument for substantial levels of agricultural protection.
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Volume (Year): 25 (1992)
Issue (Month): 2 (May)
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