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.
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- Avinash Dixit, 2005.
"Trade And Insurance With Moral Hazard,"
World Scientific Book Chapters,
in: An Inframarginal Approach To Trade Theory, chapter 4, pages 53-74
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"International rules and institutions for trade policy,"
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in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 29, pages 1495-1551
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Oxford University Press, vol. 104(1), pages 195-203.
- Avinash Dixit, 2005. "Trade And Insurance With Imperfectly Observed Outcomes," World Scientific Book Chapters, in: An Inframarginal Approach To Trade Theory, chapter 5, pages 75-84 World Scientific Publishing Co. Pte. Ltd..
- Avinash Dixit, 1989. "Trade and Insurance with Adverse Selection," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 235-247.
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"Measuring Industry Specific Protection: Antidumping in the United States,"
NBER Working Papers
4696, National Bureau of Economic Research, Inc.
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