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Competitive General Equilibrium with Finite Change and Theory of Policy Making
Author(s) -
Beladi Hamid,
Chakrabarti Avik,
Marjit Sugata
Publication year - 2016
Publication title -
economics and politics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.822
H-Index - 45
eISSN - 1468-0343
pISSN - 0954-1985
DOI - 10.1111/ecpo.12068
Subject(s) - tariff , economics , equivalence (formal languages) , production (economics) , general equilibrium theory , commercial policy , international economics , microeconomics , international trade , mathematics , discrete mathematics
We visit the non‐equivalence of tariff and quota in higher dimensional finite change trade models when goods outnumber factors of production. Under competitive conditions, exogenous shocks (e.g., exposure to international trade) support the production of only a subset of commodities. If we try to protect some of the vanishing goods, tariff and quota will have different results when a tariff turns out to be a more restrictive policy than a quota, contrary to the conventional wisdom.