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Income distribution and the contractionary effect of protection : A theoretical analysis


  • Marjit, Sugata
  • Kabiraj, Tarun


In terms of a simple model we show that removal of tariff from a competing foreign brand is likely to expand the size of the domestic industry when income disparities exist. A tariff increases profits of the local monopolist but is capable of cutting down the size of the local industry. After providing the general theoretical condition, we construct an example (from a class of examples) where such an outcome holds in equilibrium.
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  • Marjit, Sugata & Kabiraj, Tarun, 1993. "Income distribution and the contractionary effect of protection : A theoretical analysis," Economics Letters, Elsevier, vol. 41(4), pages 399-405.
  • Handle: RePEc:eee:ecolet:v:41:y:1993:i:4:p:399-405

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    References listed on IDEAS

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    2. Nevile, J W & Rao, B Bhaskara, 1996. "The Use and Abuse of Aggregate Demand and Supply Functions," The Manchester School of Economic & Social Studies, University of Manchester, vol. 64(2), pages 189-207, June.
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    5. William Poole, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, Oxford University Press, vol. 84(2), pages 197-216.
    6. Pesaran, M Hashem, 1988. "On the Policy Ineffectiveness Proposition and a Keynesian Alternative: A Rejoinder," Economic Journal, Royal Economic Society, vol. 98(391), pages 504-508, June.
    7. Rao, B Bhaskara, 1991. "What Is the Matter with Aggregate Demand and Aggregate Supply?," Australian Economic Papers, Wiley Blackwell, vol. 30(57), pages 264-277, December.
    8. Rao, B Bhaskara, 1992. "Some Further Evidence on the Policy Ineffectiveness Proposition," Economic Journal, Royal Economic Society, vol. 102(414), pages 1244-1250, September.
    9. Robert M. Solow, 2000. "Toward a Macroeconomics of the Medium Run," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 151-158, Winter.
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    11. David Colander, 1995. "The Stories We Tell: A Reconsideration of AS/AD Analysis," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 169-188, Summer.
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    Cited by:

    1. Acharyya, Rajat, 2005. "Quality discrimination among income constrained consumers," Economics Letters, Elsevier, vol. 86(2), pages 245-251, February.
    2. Hamid Beladi & Sugata Marjit & Xinpeng Xu, 2011. "Protection, Involuntary Self‐Employment And Welfare," The Japanese Economic Review, Japanese Economic Association, vol. 62(2), pages 184-195, June.
    3. Soma Roy, 2011. "Income Distribution, Spillover Effects And Choice Of Product Quality," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 36(2), pages 61-86, June.

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