In 1938, the author analysed the paradoxical case of immiserizing growth where a country, with monopoly power in trade, found that the growth-induced deterioration in its terms of trade implied a sufficiently large loss of welfare to outweigh the primary gain from growth. An obvious corollary of this proposition was that, if the country imposed an optimum tariff this paradox would be eliminated. The original immiserizing growth phenomenon belongs to the class of cases where a welfare-reducing distortion in the economy is the cause of the immiseration. Since the primary cause of the immiseration is the reduction in gains from trade resulting from shifts in the foreign offer curve facing the country, even though optimal policies are being followed before and after growth, there is no possibility of devising policies to escape such immiseration. The reduction in gains from trade, required to produce immiseration, would merely have to be larger than in the case where the initial pre-growth situation is optimal and hence characterised by a higher welfare level.

This paper proposes directly unproductive, profit-seeking (DUP) activities as a general concept that embraces a wide range of recently analyzed economic activities, including the subset of rent-seeking activities considered by Krueger. It then proceeds to provide a synthesis and generalization of the welfare-theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the DUP activity. Thus a unification and overview of the subject are achieved. In this paper, I begin in Section I by briefly discussing the common, unifying essence of the phenomena so analyzed and then arguing why they are best described as directly unproductive, profit-seeking (DUP) activities. Next, I proceed in Section II to differentiate analytically among different types of such activities, with a view of classifying them into categories which are analytically meaningful from the view-point of their welfare impact. Existing analyses of specific problems, such as tariff seeking and revenue seeking, are then readily identified in Section III as belonging to one such category or another, and the welfare consequences demonstrated in these analyses are then shown to be only specific illustrations of a wider class of DUP activities with identical welfare consequences.

The article focuses on the Heckscher-Ohlin theorem in the multi-commodity case. Economist Ronald Jones, in his seminal paper on Heckscher-Ohlin theory, has argued that for the case of two countries, two factors and several commodities, the Heckscher-Ohlin theorem would certain valid in the following weak sense: "Ordering the commodities with respect to the capital-labor ratios employed in production is to rank them in order of comparative advantage. Demand conditions merely determine the dividing line between exports and imports, it is not possible to break the chain of comparative advantage by exporting, say the third and fifth commodities and importing the fourth when they are ranked by factor intensity" Furthermore, as Jones had pointed out if transport costs is introduced, the theorem can be revalidated. With transport costs on every commodity, commodity prices would no longer be equal across countries in trade, and therefore factor prices also could not be equalized via commodity price equalization. Thus, while a commodity in the middle of a chain of exportables may be priced out of the export market into being a non-traded good by high transportation costs, it is impossible for it to be turned into an imported good.

In a brilliant and pioneering paper, John Harris and Michael Todaro introduced a model with two sectors, manufacturing (urban) and agriculture (rural), a (sticky) minimum wage in manufacturing and consequent unemployment. They also introduced a labor allocation mechanism under which, instead of the usual equalization of actual wages, the actual rural wage was equated with the expected urban wage; the latter was defined as the (sticky) minimum wage weighted by the rate of employment, so that, unlike in the standard rigid-wage models of trade theory, the unemployment resulting from the minimum wage is to be construed as specific to the urban sector. In the context of this model, Harris and Todaro analyze two policies: a wage subsidy policy in the manufacturing sector and a labor-mobility restriction policy. They argue that the former, as well as the latter, can be used to improve welfare, defined as a function of available goods in the usual way; but that, to attain the optimal first best solution, both policies are necessary.

This paper highlights results of the National Bureau of Economic Research's (NBER) research project on exchange control, liberalization and economic development from 1970-1973. Initial adoption of exchange controls was generally an ad hoc response to external events. The optimal resource allocation dictum--that the marginal cost of earning foreign exchange should be equated with the marginal cost of saving foreign exchange--was generally abandoned in favor of saving foreign exchange at all costs. An export-oriented development strategy generally entails relatively greater use of indirect, rather than direct, interventions. There is considerable evidence from the individual country studies that direct intervention may be considerably more costly than is generally recognized. Export rebates, tariffs, surcharges, import entitlement schemes, and a host of other devices are generally employed under quantitative restrictions regimes, and they lead to a wide dispersion in effective exchange rates by commodity categories. The effect of liberalization is often to induce a recessionary tendency rather than the traditionally feared inflationary impact. Even when there is a single domestic price for the imported good, the method of license allocation makes an important difference to resource allocation and income distribution.

The article investigates the Ronald Findlay-Stanislaw Wellisz and T. N. Srinivasan-Bhagwati (F-W-S-B) two-by-two small-country model of traditional international trade theory. Section I recapitulates the basic F-W-S-B analysis, retaining the two-by-two model but distinguishing between the with-distortion and the no-distortion cases. Section II examines the many-good-and-factors cases: goods equal factors, no distortion; good equal factors, with distortion; goods outnumber factors, no distortion; goods outnumber factors, with distortion; factors outnumber goods, no distortion and factors outnumber goods, with distortion. Section III offers concluding observations, indicating the applicability of the analysis to other problems in trade theory and the relationship of the results to mathematical programming. The F-W-S-B model is characterized by three key features: constant-returns-to-scale production functions; two primary factors producing two graded goods; and fixed foreign prices for the two traded goods. The uniqueness and stationarity of the marginal variational shadow prices in the two-by-two F-W-S-B model, with and without the specified distortions, do not necessarily carry over to the cases with unequal numbers of goods and factors that need to be analyzed as soon as the author consider many goods and factors. The analysis leads to many observations. First, the relative numbering of factors and goods is of signifiance. Second, the analysis has clear applicability to the transfer problem, conceived not as a transfer of purchasing power, but rather as a transfer of factors of production as may be the case when reparations payments have to be made in barter. Third, the analysis has applicability therefore to the theory of international factor mobility.

Analyzes the theory of tariffs in the revenue seeking perspective. Comparison between tariffs and quotas; Benefits of the premium seeking; Discussion on the tariff policy.

Some standard topics in the theory of international trade are reconsidered in this paper by distinguishing between national and aggregate income when fixed supplies of foreign inputs are present within the home country. Under conditions that would ensure a national welfare gain if foreign ownership were absent, international transfer, economic growth, or tariff policy might cause a national welfare loss in the presence of foreign ownership. The techniques developed could be applied to other domestic distinctions (such as those based on race, sex, age, or ethnicity) and to the theory of customs unions in a three-country world.

The paper addresses the problem of deriving shadow prices for use in project evaluation when the existing allocation is characterized by ad valorem trade distortions. The analysis is used to clarify and resolve the long-standing debate among effective-rate-of-protection and domestic-resource-cost proponents as to the respective merits of their measures as methods of project evaluation. The derivation of shadow factor prices is then extended to three major factor market imperfections familiar from extensive trade-theoretic analysis.

This paper generalizes the Global Correspondence Principle by extending, in two major ways, Paul Samuelson's 1971 analysis of the exchange rate response to an international purchasing-power transfer. We analyze the price effect of a shift in any parameter, not necessarily a transfer. We then explore the resulting adjustments in any nonprice variable such as welfare. As our analysis shows, the direction of these adjustments depends neither on whether they are small or large nor on whether equilibrium is locally stable or unstable.