lecture note 6

Figure 106 shows an outcome in which the gains are

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Unformatted text preview: in which the gains are very asymmetric despite being identical countries. There are multiple equilibria: just reverse the labeling of the countries in Figure 10.6. This plus the unequal gains creates a role for government policy. Figure 10.5 Figure 10.6 X2 p* X2 X2 X2 U U p* Df * a D* X =D a Uf Dh p* Uh X1 X 1 X1 X 1 Government Policies 14 1. Public policy can generate trade, but it is not necessarily good trade and must be welfare worsening if everything is optimal to start with (if it ain’t ....). Exports must not be confused with welfare. 2. There is a symmetry between a tax in one sector and a subsidy to the other sector. Why are governments so paranoid about foreign subsidies but not about foreign taxes? 3. Production externalities are thought to be common. They can lead to gains from trade between similar countries, though: (a) there may exist multiple equilibria (b) similar countries do not benefit equally (c) these two together create a possible role for government policy Tax rates around the world - Wikipedia, the free encyclopedia Page 1 of 10 Tax rates around the world From Wikipedia, the free encyclopedia Taxation Comparison of tax rates around the world is difficult and somewhat subjective. Tax laws in most countries are extremely complex, and tax burden falls differently on different groups in each country and sub-national unit. The lists below give an indication by rank of some ra...
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