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Risk Aversion, Terms of Trade Uncertainty and Social-Consensus Trade Policy

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  • Cassing, J H
  • Hillman, A L
  • Long, N V

Abstract

In the Ricardo-Viner model under certainty, some specific factors areharmed by any trade tax, and mo bile factors favor taxes on some-but not all-goods. This paper demonstrates in t he context of the Ricardo-Viner trade model with terms-of-trade uncertainty, that in the presence of incomplete insurance markets a terms-of-trade contingent tr ade tax commitment can improve welfare (without any explicit income redistributi on) for every factor owner. Furthermore,this result holds in both the short run , with factor specificity, and the long run before any investment decision in sp ecificity or mobility has been implemented. Copyright 1986 by Royal Economic Society.

Suggested Citation

  • Cassing, J H & Hillman, A L & Long, N V, 1986. "Risk Aversion, Terms of Trade Uncertainty and Social-Consensus Trade Policy," Oxford Economic Papers, Oxford University Press, vol. 38(2), pages 234-242, July.
    • Handle: RePEc:oup:oxecpp:v:38:y:1986:i:2:p:234-42
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    Cited by:

    1. Bin, Sheng, 2000. "The Political Economy of Trade Policy in China," Working Papers 10/2000, Copenhagen Business School, Department of Management, Politics & Philosophy.
    2. Christophe Gouel, 2016. "Trade Policy Coordination and Food Price Volatility," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(4), pages 1018-1037.
    3. Christophe Gouel & Sébastien Jean, 2015. "Optimal Food Price Stabilization in a Small Open Developing Country," The World Bank Economic Review, World Bank, vol. 29(1), pages 72-101.
    4. James Gaisford & Olena Ivus, 2014. "Should Smaller Countries Be More Protectionist? The Diversification Motive for Tariffs," Review of International Economics, Wiley Blackwell, vol. 22(4), pages 845-862, September.
    5. Christophe Gouel, 2014. "Food Price Volatility and Domestic Stabilization Policies in Developing Countries," NBER Chapters, in: The Economics of Food Price Volatility, pages 261-306, National Bureau of Economic Research, Inc.
    6. Forteza, Alvaro, 2001. "Multiple equilibria in government transfer policy," European Journal of Political Economy, Elsevier, vol. 17(3), pages 531-555, September.
    7. Svaleryd, Helena & Vlachos, Jonas, 2002. "Markets for risk and openness to trade: how are they related?," Journal of International Economics, Elsevier, vol. 57(2), pages 369-395, August.
    8. Jensen, Richard & Thursby, Marie, 1990. "Tariffs with private information and reputation," Journal of International Economics, Elsevier, vol. 29(1-2), pages 43-67, August.
    9. Willmann, Gerald & Debaere, Peter & Glaser, Toni, 2015. "Choosing between Protectionism and Free Trade in an Uncertain World," CEPR Discussion Papers 10625, C.E.P.R. Discussion Papers.
    10. Garen, John & Trask, Kathleen, 2005. "Do more open economies have bigger governments? Another look," Journal of Development Economics, Elsevier, vol. 77(2), pages 533-551, August.

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