Tariffs, Import Quotas, Voluntary Export Restraints and Immiserizing Growth

By Yeh, Y. H. | American Economist, Spring 1999 | Go to article overview

Tariffs, Import Quotas, Voluntary Export Restraints and Immiserizing Growth


Yeh, Y. H., American Economist


The differences among tariffs, import quotas and voluntary restraints in their economic effects have been discussed extensively in the literature (1, 3, 5). The purpose of this paper is to show another difference among them. It will be shown that a country may or may not experience immiserizing growth in the presence of a trade restriction. The outcome depends on whether the country restricts its trade with tariffs, import quotas or voluntary export restraints. The offer curve approach (4) is used in this study. It is assumed that neither the exportable good nor the importable good is an inferior good.

In Figure 1, the horizontal axis and the vertical axis measure the exportable good X and the importable good Y of the home country A, respectively. OA is the free trade offer curve of country A before growth. OB is the free trade offer curve of the foreign country.

Now assume that country A wants to reduce the amount of imports to, say, OQ of good Y. Country A can attain this goal by imposing a tariff. O[A.sub.t] is the offer curve after the tariff which intersects OB at E. The welfare of country A will be represented by the trade indifference curve I or its corresponding consumption indifference curve c, which is tangent to the pregrowth production possibility curve MN.

Country A also could attain the same goal by imposing an import quota equal to OQ of good Y. The offer curve after the import quota is OGQ, which intersects OB at E. Like the tariff case, the welfare of country A is represented by the trade indifference curve I?

Lastly, country A also could restrict its imports by using a voluntary export restraint. In this case, country A will reach point G where the foreign offer curve after the voluntary export restraint, OEG, intersects OA. The welfare of country A will be represented by the trade indifference curve [I.sub.v].(2)

Next suppose that there is an increase in import demand (or export supply) due to growth (2). Country A's free trade offer curve will shift to [Mathematical Expression Omitted]. This is because given any international price line, country A would like to export more and import more after the increase in import demand.

After growth, the offer curve of country A under the import quota becomes [Mathematical Expression Omitted], which intersects OB at E. The welfare of country A is now represented by the dashed trade indifference curve [Mathematical Expression Omitted] or the corresponding consumption indifference curve [Mathematical Expression Omitted] which is tangent to the postgrowth production possibility curve [Mathematical Expression Omitted]. This means that the welfare of country A always increases after growth. Growth will lead (1) to an increase in welfare as the production possibility curve shifts outwards. However, it might also lead (2) to a change in the terms of trade which might benefit or hurt the country. Moreover, it might lead (3) to a change in the volume of trade and thus enhance or reduce the gains from trade. In the presence of an import quota, the last two effects are absent. Hence, growth unambiguously makes the country better off.

On the other hand, under the tariff, the tariffdistorted offer curve after the increase in import demand is [Mathematical Expression Omitted] which intersects OB at F. The welfare of country A is represented by the dashed trade indifference curve [Mathematical Expression Omitted].(4) Since both I and [Mathematical Expression Omitted] represent a lower welfare level than [Mathematical Expression Omitted], the welfare level represented by [Mathematical Expression Omitted] could be lower than the welfare level represented by I. This means that immiserizing growth can arise under the tariff.(5)

Unlike the import quota case where the terms of trade and the amount of imports remain the same after growth, the amount of imports increases and the terms of trade deteriorate after growth under the tariff. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Tariffs, Import Quotas, Voluntary Export Restraints and Immiserizing Growth
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.