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Optimum Trade Intervention in the Presence of Multinationals

Author

Listed:
  • Hamid Beladi

    (The University of Dayton)

  • Basudeb Biswas

    (The University of Dayton)

  • Gopal Tribedi

    (The University of Dayton)

Abstract

This paper shows the non-optimality of the free trade policy in a labour-surplus economy where multinational corporations operate in the importable sector with distortions in the capital market. It then examines the welfare implications of alternative trade interventions policies. The paper illustrates that (a) a tariff and a production subsidy to the importable sector reduce welfare, while (b) an export subsidy and a production subsidy to the exportable sector enhance welfare. The optimum subsidy rates necessary to implement the outward looking trade policy are also derived in the paper.

Suggested Citation

  • Hamid Beladi & Basudeb Biswas & Gopal Tribedi, 1992. "Optimum Trade Intervention in the Presence of Multinationals," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 27(2), pages 183-194, July.
    • Handle: RePEc:dse:indecr:v:27:y:1992:i:2:p:183-194
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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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