The Foreign Dependence Question
Journal of Political Economy
1977
An embargo probability leads to private adjustments to curtail consumption and expand production, raising marginal value of consumption less than of production. If there are unemployment or foreign policy externalities, there is an optimal tariff which is proportional to foreign dependence, is inversely proportional to elasticity of external embargo loss, varies directly with embargo probability, and depends more complexly on other parameters. Stockpiling should limit embargo price rise to unit cost of storage divided by embargo frequency. With low embargo frequency, the price rise based on the stockpiling criterion may be greater than with no stockpiling. is then unwarranted.
- DOI
- 10.1086/260565
- Volume
- 85 (2)
- Pages
- 323-347
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref