Trade Policy and Economic Welfare

by Corden, W. Max

• ISBN13: 9780198292234
• ISBN10: 0198292236
• Edition: 2nd
• Format: Hardcover
• Copyright: 1997-04-17
• Publisher: Clarendon Press

Summary

The second edition of this classic text on international economics includes three completely new chapters on the environment and trade policy, strategic trade policy, and the relationship between trade policy and the exchange rate. The first edition introduced a number of ideas into policycircles; the new edition has been shortened and substantially revised to point up the themes. that have subsequently become prominent in discussions of free trade and protection. Trade Policy and Economic Welfare expounds the normative theory of trade policy. It includes discussion of static and dynamic arguments for protection:effects of trade policy on income distribution, monopoly, X-efficiency, foreign investment and capital accumulation; protection of technologyindustries; the choice between tariffs and subsidies as methods of protection. The chapters are self-contained to allow the flexible use of the book in teaching undergraduate courses on international trade and the economics of developing countries.

Table of Contents

Introduction	1	(6)
Three Stages of Thought	2	(2)
The Scope of the Book	4	(2)
Readers' Guide	6	(1)
The Theory of Domestic Divergences	7	(26)
A Simple Model: Marginal Divergence and the Optimum Subsidy	7	(2)
By-product Distortion Effect of Tariff	9	(2)
Elaborations of the Simple Analysis	11	(3)
The Second-best Optimum Tariff	14	(1)
Marginal Divergence in Factor Cost	15	(2)
General Equilibrium and Many Commodities	17	(1)
Home-market Bias	18	(3)
The Hierarchy of Policies	21	(2)
Trade Divergences	23	(10)
Appendix 2.1: The Theory of Domestic Divergences in Two-product Geometry	26	(6)
Appendix 2.2: The Theory of Domestic Divergences: Notes on the Literature	32	(1)
The Four Assumptions of the Theory of Domestic Divergences	33	(12)
By-product Distortion Costs of Revenue-raising: Subsidies Remain First-best	34	(1)
Collection Costs	35	(1)
By-product Costs of Revenue-raising: The Need for Trading-off	36	(1)
Subsidy Disbursement Costs	37	(2)
Income Distribution Effects and the Theory of Domestic Divergences	39	(1)
Income Redistribution Not Costless	40	(2)
Illusions and an Imperfect World	42	(3)
Trade Taxes as Sources of Government Revenue	45	(16)
Some Simple Principles of Optimum Taxation	46	(3)
The Importance of Collection Costs	49	(2)
Smuggling and Underinvoicing	51	(2)
The Optimum Tariff Structure: The Marginal Cost of Raising Revenue	53	(4)
Export Taxes	57	(1)
The Declining Importance of Trade-Tax Revenue in the Process of Economic Development	58	(3)
Protection and Income Distribution	61	(20)
The Effects of Protection on Income Distribution	61	(3)
The Stolper-Samuelson Model	64	(8)
The Conservative Social Welfare Function	72	(4)
Senescent Industry Protection and Adjustment Assistance	76	(2)
Interregional Income Distribution	78	(3)
The Terms of Trade Argument For Taxes On Trade	81	(24)
The Optimum Trade Tax in the Two-sector Model	82	(6)
Multicommodity Model	88	(1)
Private Monopoly	89	(1)
Foreign Reaction and Retaliation	90	(3)
Growth and the Terms of Trade	93	(2)
Practical Significance of the Terms-of-trade Argument	95	(10)
Appendix 6.1: The Optimum Export Tax and Optimum Tariff	100	(5)
Monopoly, Market Structure and Economies of Scale	105	(34)
The Effects of Protection on Monopoly Profits	105	(6)
Fragmentation of Production	111	(3)
Tariffs and Market Structure	114	(3)
Made-to-measure Tariffs	117	(3)
The X-efficiency Effects of Protection and Monopoly	120	(6)
The Rent-seeking Society	126	(2)
Dumping	128	(11)
The Infant Industry Argument	139	(23)
Dynamic Internal Economies	140	(6)
Dynamic External Economies	146	(5)
The Mill-Bastable Test	151	(2)
Wide Application of the Infant Industry Argument	153	(1)
The Problem of Investment Coordination	154	(2)
Economies of Scale and the Pseudo-Infant Industry Argument	156	(2)
Research and Development, and the Protection of Advanced Technology Industries	158	(4)
Protection And Capital Accumulation	162	(19)
The Real Income Effect of Protection on Savings and Investment	162	(3)
Savings and the Income Distribution Effects of Protection	165	(2)
Cheap Imported Capital Goods, Investment and Employment	167	(7)
Consumption Postponement and the Demonstration Effect	174	(1)
The Inducement to Invest and Backward Linkage	175	(4)
Learning and the Rate of Growth	179	(2)
Some Dynamic Aspects of Trade Policy	181	(12)
The Anticipation of Price Changes	182	(1)
Fluctuations in Export Earnings	183	(2)
Risk Avoidance	185	(3)
The Cost of Protection and the Rate of Grwoth	188	(2)
The `Dynamic' Effects of Trade on Knowledge	190	(3)
Protection and Foreign Investment	193	(22)
The Effect of Protection on Foreign Capital Inflow	194	(1)
Taxation of Foreign Investment	195	(10)
Tariffs as Second-best Taxes or Subsidies on Foreign Capital	205	(2)
The Effects of a Given Tariff System on the Gains or Losses from Foreign Investment	207	(1)
Multinational Corporations	208	(7)
Optimal Tariff Dismantling	215	(7)
Some Tariffs are not Alterable	216	(1)
Concertina Method	217	(1)
Across-the-Board Reduction	218	(1)
Tariff Dismantling and the Exchange Rate	219	(3)
The Environment and Trade Policy	222	(22)
Trade Liberalization and the Environment: Small Country Case	222	(9)
Environmental Policy Interaction: Multicountry Case but no Transborder Pollution	231	(5)
Transborder Externalities and Global Public Goods	236	(4)
Capital Mobility and Capital Controls	240	(2)
Summary: The Role of Trade Policy	242	(2)
Strategic Trade Policy	244	(18)
Oligopoly and Strategic Trade Policy	244	(11)
Industrial Policy	255	(3)
Japanese Industrial Policy: What Difference Did It Make?	258	(4)
The Exchange Rate, Trade Policy, and the Current Account	262	(16)
Trade Liberalization Requires Depreciation	262	(1)
The Basic Theory	263	(4)
Exchange Rate Protection	267	(1)
Capital Inflow and the Real Appreaciation Problem	268	(3)
Real Wage Rigidity and a Balance-of-payments Problem	271	(2)
How Protection Affects the Current Account	273	(2)
The Fixed Exchange Rate Regime: What Role for Protection?	275	(2)
Summary	277	(1)
Conclusion	278	(7)
Bibliography	285	(12)
Index of Names	297	(2)
Index of Subjects	299