Trade Policy in the Presence of Economies of Scale and Product Variety

Richard H. Snape

The Economic Record, 1977, vol. 53, issue 4, 525-534

Abstract: It is well known that laissez faire may not be the ‘first‐best’ policy in a closed economy where economies of scale are present. Corden has shown that this conclusion can carry over into an open economy, though under his assumption that imported goods are perfect substitutes for home‐produced goods, interference with international trade could not raise real income. We have shown that where there are economies of scale, and imported goods are not identical to the home produced goods, interference with trade could raise real national income, though such a form of intervention would not normally be optimal. Further, it could even be desirable to support home production of more than one ‘variety’. Measurements of ‘costs of protection’ that aggregate several varieties into one may mislead not only regarding the size of the cost but even regarding its sign.

Date: 1977
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://doi.org/10.1111/j.1475-4932.1977.tb01623.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:ecorec:v:53:y:1977:i:4:p:525-534

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0013-0249

Access Statistics for this article

The Economic Record is currently edited by Paul Miller, Glenn Otto and Martin Richardson

More articles in The Economic Record from The Economic Society of Australia Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().