TY  - JOUR
AU  - Fischer,Ronald D.
AU  - Prusa,Thomas J.
TI  - Contingent Protection as Better Insurance
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6933
PY  - 1999
Y2  - February 1999
UR  - http://www.nber.org/papers/w6933
L1  - http://www.nber.org/papers/w6933.pdf
N1  - Author contact info:
Ronald Fischer
Centro de Economia Aplicada (CEA)
Departamento de Ingenieria Industrial
Universidad de Chile
Republica 701 Santiago CHILE
E-Mail: rfischer@dii.uchile.cl

Thomas J. Prusa
Department of Economics
New Jersey Hall
Rutgers University
New Brunswick, NJ 08901-1248
Tel: 908.443.1565
E-Mail: prusa@econ.rutgers.edu
AB  - We formalize the notion that GATT exceptions such as antidumping and escape clause actions can act as insurance for import competing sectors affected by adverse price shocks.  We use a general equilibrium model with several import competing sectors and assume incomplete markets so that agents cannot contract insurance.  We show that these measures are superior to uniform tariffs as insurance mechanisms.  Moreover, we demonstrate that the optimal uniform policy may not involve a tariff at all, but rather might entail an export tax.  We also show that a tax cum subsidy policy (i.e., taxing all sectors in order to subsidize the shocked sector) improves welfare.
ER  -