Endogenous choice of trade policy instruments

Abstract

Recently developed theories of endogenous trade policy formation have attempted to explain tariffs as the result of economic interest-seeking by individuals or groups. This note demonstrates that tariffs will not emerge as a policy choice if income is redistributed solely through trade policy-induced factor price changes. A production tax cum subsidy will be adopted as both gainers and losers are better off than with a tariff. © 1987.