Optimum Trade Intervention in the Presence of Multinationals

Hamid Beladi, Basudeb Biswas () and Gopal Tribedi
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Gopal Tribedi: The University of Dayton

Indian Economic Review, 1992, vol. 27, issue 2, 183-194

Abstract: This paper shows the non-optimality of the free trade policy in a labour-surplus economy where multinational corporations operate in the importable sector with distortions in the capital market. It then examines the welfare implications of alternative trade interventions policies. The paper illustrates that (a) a tariff and a production subsidy to the importable sector reduce welfare, while (b) an export subsidy and a production subsidy to the exportable sector enhance welfare. The optimum subsidy rates necessary to implement the outward looking trade policy are also derived in the paper.

JEL-codes: F13 F23 (search for similar items in EconPapers)
Date: 1992
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Persistent link: https://EconPapers.repec.org/RePEc:dse:indecr:v:27:y:1992:i:2:p:183-194

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