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GTAP Resource #3580

"Should Countries Worry About Immiserizing Growth?"
by Tokarick, Stephen


In the presence of tariff protection, Johnson (1967) showed that factor accumulation in a two-good, two-factor model of international trade could reduce a country’s real income if the accumulation is biased sufficiently toward production of the tariff-protected good. This paper presents the conditions that must hold for immiserization to occur regardless of the number of goods or factors. In general, adding more goods beyond two seems to reduce the likelihood of immiserization. In the context of the specific factors’ model of international trade, the paper demonstrates that the chances of immiserization are greater the larger the difference between the tariff rate in the sector that uses the specific factor whose supply has increased and the tariff rates applied to the other sectors. This result provides some additional rationale for adopting a more uniform tariff structure.

The paper also examines the issue of immiserizing growth empirically. The paper reports the results of simulations using numerical general equilibrium models for 20 developing countries. For each of these countries, various simulations are conducted to assess the welfare effects of different patterns of factor accumulation. Of the 20 countries studied, only one--Tunisia--would be worse off as a consequence of an increase in the supply of the factor specific to the agriculture and raw materials sector. The paper explores the reasons for this result and relates this result to the conclusions from the first section of the paper. In particular, a factor that explains the result for Tunisia is the dispersion in tariff rates in Tunisia.

Resource Details (Export Citation) GTAP Keywords
Category: 2011 Conference Paper
Status: Published
By/In: Presented at the 14th Annual Conference on Global Economic Analysis, Venice, Italy
Date: 2011
Created: Tokarick, S. (4/14/2011)
Updated: Batta, G. (4/15/2011)
Visits: 980
No keywords have been specified.

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