Informationally Efficient Trade Barriers
Andrea Moro () and
Matthew Mitchell ()
Public Economics from University Library of Munich, Germany
Why are trade barriers often used to protect home producers, even at the cost of introducing deadweight losses from higher commodity prices? We add an informational friction to the standard textbook argument in favor of free trade, and show that trade restrictions may be a more effcient policy than a lump sum transfer to the displaced producers. Trade barriers, while generating deadweight losses, have the benefit that they do not generate a need for compensation. When the policy maker does not know the amount that should be transferred, the risk of over- compensating may make trade barrier more efficient.
Keywords: Trade barriers; Distortionary policies (search for similar items in EconPapers)
JEL-codes: D6 D7 H (search for similar items in EconPapers)
Pages: 19 pages
New Economics Papers: this item is included in nep-int
Note: Type of Document - pdf; pages: 19
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwppe:0503004
Access Statistics for this paper
More papers in Public Economics from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ().