CH8_Political Economy of Trade Policies 国际贸易理论政策与 及应用英文版本课件.pptVIP

* Political Economy of Trade Policies Module 8 1. Overview Questions What is market failure? What is the implication to trade when market fails What is the Coase Theorem? What is the industrial policy? 2. For and Against Free Trade Arguments for free trade efficiency scale economy transfer of technology reducing social cost (e.g. rent-seeking cost) For and Against Free Trade Arguments against free trade optimal tariff theory Revenue Income Distribution/welfare policy Political and strategic objectives market failure free trade no longer optimal= policy need to be used to correct market failure 3. What if market fails? Market fails if there is monopoly, or increasing returns to scale, or, … When market fails, the price no longer reflects the opportunity cost of producing this good When market fails, producer’s surplus or consumer surplus does not fully capture the benefit of producing or consuming a good - What if market fails? If the market fails to compensate the producer for the extra benefits generated p Q Sso =MCso Spr=MCpr - What if market fails? What is the first-best policy to correct market failure? - a positive externality p Q Sso Spr pw=10 q1 q3 q4 12 q2 a b c d e - What if market fails? What is the first-best policy to correct market failure? - a negative externality p Q Spr Sso pw=10 q1 q3 q4 8 q2 a b c d e f g h - What if market fails? The first-best policy is always the one which can directly correct the market failure The second-best policy is the one which is most closely targeted to the market failure though cannot directly correct it. A general rule: The closer a policy is targeted to the problem, the better it is (requires to identify the problem!) - What if market fails? An alternative to impose policies, specify the property rights Coase Theorem If costless negotion is possible, rights are well-specified, and redistribution does not affect marginal values, then the allocation of resources will be identical whatever the allocation of legal