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Quantifying Second Best Effects in Grossly Distorted Markets: The Case of the Butter Market in Poland

In: Trade Policies for Development and Transition

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  • DAVID TARR

Abstract

We develop and empirically implement a model to examine a market in a centrally planned economy characterized by a complicated maze of interrelated and offsetting distortions: the butter market in Poland. Eliminating all distortions in the butter market results in substantial structural changes and benefits to Poland. However, we find one case in which removing a distortion while others distortions remain in place results in substantial welfare losses, in classic second best fashion. Moreover, piecemeal reduction of some of the distortions results in much smaller benefits due to the offsetting effects.

Suggested Citation

  • David Tarr, 2017. "Quantifying Second Best Effects in Grossly Distorted Markets: The Case of the Butter Market in Poland," World Scientific Book Chapters,in: Trade Policies for Development and Transition, chapter 10, pages 225-239 World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789813108448_0010
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    Cited by:

    1. Morris Morkre & David Tarr, 2014. "Reforming Hungarian Agricultural Trade Policy: A Quantitative Evaluation," World Scientific Book Chapters,in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 3, pages 49-74 World Scientific Publishing Co. Pte. Ltd..
    2. Tarr, David, 1991. "When does rent-seeking augment the benefits of price and trade reform on rationed commodities? : estimates for automobiles and color televisions in Poland," Policy Research Working Paper Series 741, The World Bank.
    3. Howard J. Shatz & David G. Tarr, 2017. "Exchange Rate Overvaluation and Trade Protection: Lessons from Experience," World Scientific Book Chapters,in: Trade Policies for Development and Transition, chapter 5, pages 115-127 World Scientific Publishing Co. Pte. Ltd..

    More about this item

    Keywords

    International Trade Policy; Developing Countries; Transition Countries; Growth; Poverty; Environment; Multilateral; Adjustment Costs; Autos and Steel;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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