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The Distribution of Welfare Gains from International Price Stabilization under Distortions
Author(s) -
Just Richard E.,
Lutz Ernst,
Schmitz Andrew,
Tumovsky Stephen
Publication year - 1977
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1239392
Subject(s) - economics , welfare , distortion (music) , distribution (mathematics) , international economics , demand curve , degree (music) , microeconomics , monetary economics , market economy , mathematics , amplifier , mathematical analysis , physics , cmos , electronic engineering , acoustics , engineering
Abstract In a two‐country model with distortions and general demand and supply functions, the welfare implications of international price stabilization are analyzed. The degree of nonlinearity of the excess demand function in the free trade exporting country as well as the distortions are found to be of crucial importance in determining who gains from stabilization. With a high degree of nonlinearity, producers in both countries as well as the exporting country as a whole lose from stabilization, whereas consumers in both countries and the importing country gain. This is contrary to previous results with linearity.