Import protection and exports
Abstract
The note by Marjit and Sarkar (1995) in
this journal attempts to show that reduction
in tariffs on imports of a commodity could
lead to decline in its exports. The arguments
put forward by the authors is not only onesided
but also leave serious gaps in the
explanation of the possible results within
their model. This note shows by taking the
basic model used by Marjit and Sarkar that
reduction in import tariffs on a commodity
does not necessarily lead to a decline in
its exports. If one takes import tariff
reduction to be both on the final good and
also on intermediate goods used in its
production, it should lead to increase in
exports by shifting the cost curves
downward. Analysis of exports in the
context of the present policy reforms
towards making policy prescriptions
warrants a careful examination of the effect
of liberalisation polices in general on the
evolution of the domestic market structure
and its implications on costs of production
rather than going by piecemeal approaches.
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