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Secondbest Rates of Effective Protection with Imperfect Substitution

Secondbest Rates of Effective Protection with Imperfect Substitution Demonstrates the implications of imperfect substitutability betweendomestic and imported final goods for the determination of secondbestnominal and effective tariffs in a general equilibrium setting. Theanalysis of secondbest interventions for given policy distortionsextends that by Ruffin and Casas on homogeneous goods to the case wherethere is product heterogeneity. The secondbest optimal effective rateof protection for given policy distortions is shown to depend upon thenature of the policy distortion and the degree of substitutabilitybetween imported and domestic varieties. Although imperfect substitutionreduces the extent to which effective protection can be determined fromthe structure of protection, it increases the extent to which secondbest tariffs can be determined in a qualitative sense at least whencompared with the traditional, perfect substitution case. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Studies Emerald Publishing

Secondbest Rates of Effective Protection with Imperfect Substitution

Journal of Economic Studies , Volume 19 (1) – Jan 1, 1992

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0144-3585
DOI
10.1108/01443589210015917
Publisher site
See Article on Publisher Site

Abstract

Demonstrates the implications of imperfect substitutability betweendomestic and imported final goods for the determination of secondbestnominal and effective tariffs in a general equilibrium setting. Theanalysis of secondbest interventions for given policy distortionsextends that by Ruffin and Casas on homogeneous goods to the case wherethere is product heterogeneity. The secondbest optimal effective rateof protection for given policy distortions is shown to depend upon thenature of the policy distortion and the degree of substitutabilitybetween imported and domestic varieties. Although imperfect substitutionreduces the extent to which effective protection can be determined fromthe structure of protection, it increases the extent to which secondbest tariffs can be determined in a qualitative sense at least whencompared with the traditional, perfect substitution case.

Journal

Journal of Economic StudiesEmerald Publishing

Published: Jan 1, 1992

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