Incentive Compatible Trade Policies
Robert C. Feenstra
University of California, Davis - Department of Economics; National Bureau of Economic Research (NBER)
NBER Working Paper No. w1977
We consider a two country trade model with production uncertainty. Ifcomplete contingent markets do not exist, it is desirable for governments toadopt some trade policies to share the production risk. A full informationpolicy involves income transfers across countries, which can be achieved byequal import tariffs and export subsidies. With incomplete information weconsider incentive compatible trade policies, which are designed to be truthrevealing while partially sharing the production risk. In this case thetariff in one country may differ from the export subsidy abroad.
Number of Pages in PDF File: 24working papers series
Date posted: May 26, 2004
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