Nottingham Centre for Research on
Globalisation and Economic Policy (GEP)

GEP 14/12: Competitive General Equilibrium with Finite Change and Theory of Policy Making

Summary

We construct a generalized model of finite change. Price based strategies to protect those vanishing sectors will not be equivalent to quantity based strategies.

Abstract

We construct a generalized model of finite change whereby exogenous shocks such as international trade or technological change, not only contract, but totally shut down production in some sectors. In such cases even in a competitive structure and in absolute contrast to the conventional wisdom, price based strategies to protect those vanishing sectors will not be equivalent to quantity based strategies. We also consider factor trade and a similar asymmetry between price based and quantity based interventionist policies.

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Authors

Hamid Beladi, Avik Chakrabarti and Sugata Marjit

 

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Posted on Monday 1st December 2014

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