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Contingent protection as better insurance

  • Ronald D. Fischer

    ()

  • 1998

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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File URL: http://www.dii.uchile.cl/~cea/sitedev/cea/www/download.php?file=documentos_trabajo/ASOCFILE120030402120834.pdf
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Paper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 49.

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Date of creation: 1998
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Handle: RePEc:edj:ceauch:49
Contact details of provider: Web page: http://www.dii.uchile.cl/cea/

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  1. Robert Staiger & Frank Wolak, 1994. "Measuring Industry Specific Protection: Antidumping in the United States," International Trade 9410004, EconWPA.
  2. Dixit, Avinash, 1989. "Trade and Insurance with Imperfectly Observed Outcomes," The Quarterly Journal of Economics, MIT Press, vol. 104(1), pages 195-203, February.
  3. Robert W. Staiger, 1994. "International Rules and Institutions for Trade Policy," NBER Working Papers 4962, National Bureau of Economic Research, Inc.
  4. 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.
  5. Dixit, Avinash, 1987. "Trade and insurance with moral hazard," Journal of International Economics, Elsevier, vol. 23(3-4), pages 201-220, November.
  6. 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.
  7. Dixit, Avinash K, 1989. "Trade and Insurance with Adverse Selection," Review of Economic Studies, Wiley Blackwell, vol. 56(2), pages 235-47, April.
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