This paper investigates competition between two markets that sell close substitutes: a traditional product and a genetically modified (GM) product. Tightening an import quota on the GM product raises the prices of both goods and hurts consumers. Two scenarios are considered under free trade:...

The chain proposition of comparative advantage states that when factor prices differ between two countries producing many products with two factors, every export of the capital abundant country would be more capital intensive than any of its imports. The present note points out that an economy...

This paper investigates optimal trade policies for a developing small open economy which faces international price uncertainty. Trade taxes are used to finance provision of a public good, which enters the utility function of consumers. If demands for private goods are independent of the public...

This paper investigates whether a small country facing foreign price instability benefits from active stabilization of the domestic price of the importable. If the random tariff revenue is rebated ex post, domestic price stabilization increases income instability, and nonintervention is optimal....

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