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Optimal Production Tax and Quota under Time Consistent Trade Policies

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  • Jean-Philippe Gervais
  • Harvey E. Lapan

Abstract

This article investigates the policy active importers' incentives and welfare implications of using production and trade policies in a dynamic framework where production decisions occur before consumption decisions. We show that the equilibrium for production taxes and quotas are not equivalent, and that each equilibrium depends on whether the trade policy instruments are tariffs or quotas. Under import quotas, the equilibrium policy is to tax domestic production, whereas under a tariff either a production tax or subsidy may be optimal. We also show that a collective agreement to ban production policies is likely to be welfare-improving in many circumstances. Copyright 2001, Oxford University Press.

Suggested Citation

  • Jean-Philippe Gervais & Harvey E. Lapan, 2001. "Optimal Production Tax and Quota under Time Consistent Trade Policies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 921-933.
  • Handle: RePEc:oup:ajagec:v:83:y:2001:i:4:p:921-933
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    File URL: http://hdl.handle.net/10.1111/0002-9092.00219
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    Cited by:

    1. Abdessalem Abbassi & Lota D. Tamini & Ahlem Dakhlaoui, 2013. "Production Cost Asymmetry, Minimum Access and Reciprocal Dumping," Cahiers de recherche CREATE 2013-7, CREATE.
    2. Jean-Philippe Gervais & Bruno Larue & Harvey E. Lapan, 2008. "WTO Disciplines on Domestic Support and Market Access in Agri-Food Supply Chains," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 56(4), pages 429-444, December.
    3. Gervais Jean-Philippe & Harvey E. Lapan, 2002. "Endogenous Choice of Trade Instrument Under Uncertainty," International Economic Journal, Taylor & Francis Journals, vol. 16(4), pages 75-96.

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