Designing Policies to Open Trade

Robert Feenstra, Tracy Lewis and John McMillan

No 3258, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper we consider recent proposals to auction U.S. import quotas. using the funds so obtained to encourage relocation out of the protected industries. We argue that the information available to the government, or lack thereof, is a critical factor in understanding these policies. In a world or full information, it makes little sense to use auction quotas rather than tariffs. Similarly, it is unclear why an elaborate program of temporary protection is needed, rather than immediately opening trade and compensating people with an income transfer. When the government has Limited information, however, these policies become quite sensible and may even be optimal.

Date: 1990-02
Note: ITI IFM
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Published as Economics and Politics, 2(3), November 1990, pp. 223-240

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Working Paper: DESIGNING POLICIES TO OPEN TRADE (1989)
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