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Article
Optimal Trade Policies for a Developing Country under Uncertainty
GATT Research Papers
  • Eun Kwan Choi, Iowa State University
  • Harvey E. Lapan, Iowa State University
Publication Date
10-1-1991
Series Number
90-GATT 8
Abstract

This paper investigates optimal trade policies for a developing, small open economy that faces international price uncertainly. 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.

Copyright Owner
Iowa State University
Citation Information
Eun Kwan Choi and Harvey E. Lapan. "Optimal Trade Policies for a Developing Country under Uncertainty" (1991)
Available at: http://works.bepress.com/harvey-lapan/13/