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Transaction Falsification and the Difficulty of Achieving Pareto‐improving Gains from Trade through Lump‐sum Transfers
Author(s) -
Ichino Yasukazu
Publication year - 2012
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2012.01031.x
Subject(s) - lump sum , autarky , economics , pareto principle , order (exchange) , simple (philosophy) , microeconomics , transfer (computing) , gains from trade , transaction cost , free trade , mathematical economics , computer science , international economics , operations management , payment , finance , epistemology , parallel computing , welfare , market economy , philosophy
Lump‐sum transfer rules to redistribute the gains from free trade are examined. When individuals anticipate that free trade policy will come with a lump‐sum transfer, they are going to change their behaviors under autarky in order to get larger transfers. In spite of this falsification, can a lump‐sum transfer still make everyone enjoy the gains from free trade? In a model of simple exchange economy, a condition under which a lump‐sum transfer can make it was found, but in general it is difficult to achieve Pareto‐improving gains from free trade.