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Rent-Seeking, Trade Policy and Economic Welfare

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DOI: 10.4236/me.2011.21005    5,493 Downloads   9,964 Views   Citations

ABSTRACT

The objective of this paper is to assess the impacts that rent-seeking arising from government intervention in international trade has on welfare. More specifically, the focus is on how the granting of special import re- gimes promotes rent-seeking practices, which have negative effects on welfare. We present two concepts of nominal protection: legal tariffs and the actual import tariffs. In addition, we construct three measures of welfare: from the legal tariff; from the actual import tariffs; and from the actual import tariffs when rent-seeking is present. Finally, we compare the various measures of protection in terms of their impact on welfare. The results show that trade policies based on exceptions - such as those establishing the special im- port regimes - tends to decrease welfare.

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F. Soares and T. Moreira, "Rent-Seeking, Trade Policy and Economic Welfare," Modern Economy, Vol. 2 No. 1, 2011, pp. 31-38. doi: 10.4236/me.2011.21005.

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