Optimal Public Policy in Open Economies

Alasdair Smith

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: This paper applies simple duality theory to integrate some elements of the theory of public finance into the theory of economic policy in open distorted economies. Results on the effect of reductions in distortions are derived which generalize the results of Dixit (Journal of Public Economics, 1975). Extensions of the theory of immiserising growth are made, focussing on the role of shadow factor prices, following Bhagwati, Srinivasas and Wan (Economic Journal, 1978). The results most relevant for piecemeal policymaking (Dasgupta and Stiglitz, 1974 ; Findlay and Wellisz, 1976 ; Srinvasan and Bhagwati, 1978 ; all Journal of Political Economy) are shown to hold strictly only in small open economies in which all goods are internationally traded.

Pages: 37 pages
Date: 1980
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:176

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