Protectionism and Increasing Returns

  • Roy Ruffin
  • Wilfred J. Ethier


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.


Free Trade Comparative Advantage Capacity Constraint Consumer Surplus External Economy 
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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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