Revenue motives and trade liberalization

David H. Feldman, Ira N. Gang

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

Governments in more-developed economies partially compensate import-competing industries when world prices fall, i.e., they lean against the wind. Less-developed economies often liberalize in response to the same shock. We use a political-support maximization model with revenue motives to derive conditions under which a rational policymaker would respond to lower world prices by reducing tariff protection for an import-competing industry. An initial tariff that exceeds the maximum revenue level proves necessary but not sufficient for politically optimal liberalization following a fall in the world price of the importable good.

Original languageEnglish (US)
Pages (from-to)276-281
Number of pages6
JournalReview of International Economics
Volume4
Issue number3
DOIs
StatePublished - 1996

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development

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