Contingent Protection as Better Insurance

Ronald Fischer and Thomas Prusa

No 6933, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We formalize the notion that GATT exceptions such as antidumping and escape clause actions can act as insurance for import competing sectors affected by adverse price shocks. We use a general equilibrium model with several import competing sectors and assume incomplete markets so that agents cannot contract insurance. We show that these measures are superior to uniform tariffs as insurance mechanisms. Moreover, we demonstrate that the optimal uniform policy may not involve a tariff at all, but rather might entail an export tax. We also show that a tax cum subsidy policy (i.e., taxing all sectors in order to subsidize the shocked sector) improves welfare.

JEL-codes: F13 (search for similar items in EconPapers)
Date: 1999-02
New Economics Papers: this item is included in nep-ias
Note: ITI
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Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Contingent protection as better insurance (1999)
Working Paper: Contingent protection as better insurance (1998)
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