Optimal Trade Policies for a Developing Country Under Uncertainty

This paper investigates optimal trade policies for a developing small open economy which faces international price uncertainty. Trade taxes are used to finance provision of a public good, which enters the utility function of consumers. If demands for private goods are independent of the public good, the optimal composite tariff dominates the optimal quota. If the optimal state-contingent tariff increases with the foreign price, the optimal specific tariff also dominates the optimal quota, regardless of risk aversion. However, the ranking of the optimal specific tariff and the optimal quota generally depends on risk attitudes as well as ordinal preferences.


Issue Date:
1990
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/51263
Total Pages:
31
Series Statement:
Working Paper
90-2




 Record created 2017-04-01, last modified 2017-08-25

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