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A Neoclassical View of Trade Liberalization

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  • Karp, Larry

Abstract

This paper attempts to provide a balanced view of the neoclassical economists' perspective on trade liberalization, with an emphasis on the agricultural sector. I review the basic arguments in favor of competitive markets in general and free trade in particular. These arguments are based on restrictive assumptions which often fail to hold. Under more realistic assumptions, the arguments in favor of free trade are invalid. Economists remain skeptical of the benefits of trade restrictions, but this is a nuanced judgment, rather than a theoretical certainty. I describe a number of situations where market failures imply that trade restrictions can improve efficiency.

Suggested Citation

  • Karp, Larry, 1997. "A Neoclassical View of Trade Liberalization," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt13f2q378, Department of Agricultural & Resource Economics, UC Berkeley.
    • Handle: RePEc:cdl:agrebk:qt13f2q378
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    References listed on IDEAS

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    1. John Beghin & Larry S. Karp, 1992. "Tariff Reform in the Presence of Sector-Specific Distortions," Canadian Journal of Economics, Canadian Economics Association, vol. 25(2), pages 294-309, May.
    2. Karp, Larry & Paul, Thierry, 1994. "Phasing In and Phasing Out Protectionism with Costly Adjustment of Labour," Economic Journal, Royal Economic Society, vol. 104(427), pages 1379-1392, November.
    3. repec:fth:stanho:e-92-3 is not listed on IDEAS
    4. David M. G. Newbery & Joseph E. Stiglitz, 1984. "Pareto Inferior Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(1), pages 1-12.
    5. Matsuyama, Kiminori, 1992. "Agricultural productivity, comparative advantage, and economic growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 317-334, December.
    6. repec:hoo:wpaper:e-92-3 is not listed on IDEAS
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