Buffer stocks are better stabilizers than quotas
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Michael Pelcovits (1979, p. 307) recently showed that with an unstable foreign excess supply curve, either a fixed quota or a buffer stock program with a fixed tariff can be used to stabilize domestic price at a given level, and both policies 'will have the same effect on social welfare [so...t]he choice between [the two...] must then be made on the basis of administrative cost and feasibility'. However, he reached his conclusion by ranking the two policies on the basis of domestic welfare, and in this note we demonstrate with his same model that on the basis of foreign welfare the buffer stock is better than the quota. Thus, world welfre is higher under the buffer stock than under the quota. © 1981.
Published Version (Please cite this version)10.1016/0022-1996(81)90047-7
Publication InfoTower, E (1981). Buffer stocks are better stabilizers than quotas. Journal of International Economics, 11(1). pp. 113-115. 10.1016/0022-1996(81)90047-7. Retrieved from https://hdl.handle.net/10161/1957.
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Professor of Economics
Professor Tower specializes in finance, computable general equilibrium modeling, macroeconomics, development economics, microeconomics, and managerial economics. He conducts a majority of his research within the study of trade and development, exploring a variety of variables from tariffs, quotas, and time zone arbitrage, to equities, mutual funds, and index mutual funds. Since he began publishing his work in 1965, he has contributed over 130 articles to leading academic journals and has had s