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Protectionism and Increasing Returns

  • Roy Ruffin
  • Wilfred J. Ethier
Chapter

Abstract

We reconsider the economics of protection with an industry subject to increasing returns. On the whole the case for free trade is actually greater than without increasing returns. Exceptionally high tariffs are required to protect a high-cost increasing-returns industry. However, beneficial tariffs or subsidies for a country with a comparative disadvantage become prominent when its partner country with a comparative advantage faces a relevant capacity constraint.

Keywords

Free Trade Comparative Advantage Capacity Constraint Consumer Surplus External Economy 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer India 2014

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of HoustonHoustonUSA
  2. 2.Department of EconomicsUniversity of PennsylvaniaPhiladelphiaUSA

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