8 Intl Econ Notes

8 Intl Econ Notes - Intl Econ Notes 4/27/09 A country can...

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Int’l Econ Notes 4/27/09 A country can get gains from trade as well as a redistribution of income o If put restrictions on trade, you change prices and in effect redistribute income again Using right tool for the job when using econ for trade policy o So, where o Trade mentioned with regard to distribution of income for workers affected by trade (usually negatively) Trade affects income INdirectly so it would be inefficient to use trade policy A more effective policy would be a tax policy (like the earned income tax credit) o Negative environmental externalities (use trade policy to restrict the size of those industries) Trade policy is inefficient for affecting this prob Consumers perceive too low a price for the goods that have high carbon content; if use trade policy to affect these externalities, only affect traded goods and not all goods w/ carbon content Consumption tax would be a more effective to combat this issue This kind of tax would raise prices (b/c shipping uses carbon and u have to ship to trade!) o Can also use trade policy to affect your terms of trade This is the most effective way to use trade policy; trade policy affects terms of trade most directly so it’s the efficient policy
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8 Intl Econ Notes - Intl Econ Notes 4/27/09 A country can...

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