Trade and Insurance with Adverse Selection

Avinash Dixit

The Review of Economic Studies, 1989, vol. 56, issue 2, 235-247

Abstract: This paper considers a small open economy with a safe sector and a risky sector. The probability of success in the risky activity differs across individuals, and is private information. It is shown that policies that sustain informationally constrained Pareto optima should not include tariffs. A laissez-faire competitive equilibrium, if it exists, is Pareto optimal. These results contrast with previous literature on the role of tariffs as insurance, where private risk markets are assumed away in an ad hoc manner.

Date: 1989
References: Add references at CitEc
Citations: View citations in EconPapers (39)

Downloads: (external link)
http://hdl.handle.net/10.2307/2297459 (application/pdf)
Access to full text is restricted to subscribers.

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:oup:restud:v:56:y:1989:i:2:p:235-247.

Access Statistics for this article

The Review of Economic Studies is currently edited by Thomas Chaney, Xavier d’Haultfoeuille, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Katrine Loken, Elias Papaioannou, Vincent Sterk and Noam Yuchtman

More articles in The Review of Economic Studies from Review of Economic Studies Ltd
Bibliographic data for series maintained by Oxford University Press ().