Incentive Compatible Trade Policies
We consider a two country trade model with production uncertainty. If complete contingent markets do not exist, it is desirable for governments to adopt some trade policies to share the production risk. A full information policy involves income transfers across countries, which can be achieved by equal import tariffs and export subsidies. With incomplete information we consider incentive compatible trade policies, which are designed to be truth revealing while partially sharing the production risk. In this case the tariff in one country may differ from the export subsidy abroad.
|Date of creation:||Jul 1986|
|Date of revision:|
|Publication status:||published as Feenstra, Robert C. "Incentive Compatible Trade Policies," Scandinavian Journal of Economics, 1987.|
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