Contingent protection as better insurance
We formalize the notion that GATT exceptions such as antidumping and escape clause actions can act as insurance for import competing sectors affected by adverse price shocks. We use a general equilibrium model with several import competing sectors and assume incomplete markets so that agents cannot contract insurance. We show that these measures are superior to uniform tariffs as insurance mechanisms. Moreover, we demonstrate that the optimal uniform policy may involve a tariff at all, but rather might entail and export tax. We also show that a tax cum subsidy policy (i.e. taxing all sectors in order to subsidize the shocked sector) improves welfare.
References listed on IDEAS
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- Avinash Dixit, 1989. "Trade and Insurance with Adverse Selection," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 235-247.
- Wendy L. Hansen & Thomas J. Prusa, 1995. "The Road Most Taken: the Rise of Title VII Protection," The World Economy, Wiley Blackwell, vol. 18(2), pages 295-313, 03.
- Robert W. Staiger & Frank A. Wolak, 1994.
"Measuring Industry Specific Protection: Antidumping in the United States,"
NBER Working Papers
4696, National Bureau of Economic Research, Inc.
- Staiger, R.W. & Wolak, F.A., 1994. "Measuring Industry Specific Protection: Antidumpting in the United States," Working papers 9413, Wisconsin Madison - Social Systems.
- Robert Staiger & Frank Wolak, 1994. "Measuring Industry Specific Protection: Antidumping in the United States," International Trade 9410004, EconWPA.
- Robert W. Staiger, 1994.
"International Rules and Institutions for Trade Policy,"
NBER Working Papers
4962, National Bureau of Economic Research, Inc.
- Staiger, Robert W., 1995. "International rules and institutions for trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 29, pages 1495-1551 Elsevier.
- Staiger, Robert W & Tabellini, Guido, 1987. "Discretionary Trade Policy and Excessive Protection," American Economic Review, American Economic Association, vol. 77(5), pages 823-37, December.
- Dixit, Avinash, 1987. "Trade and insurance with moral hazard," Journal of International Economics, Elsevier, vol. 23(3-4), pages 201-220, November.
- Avinash Dixit, 1989. "Trade and Insurance with Imperfectly Observed Outcomes," The Quarterly Journal of Economics, Oxford University Press, vol. 104(1), pages 195-203.
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