FIXED PRICE CONTROLS AND AD-VALOREM DISTORTIONS IN AN OPEN-ECONOMY

This paper compares the welfare effects of ad valorem and fixed-price distortions for an open economy. In the case of export protection, domestic factor growth is much more likely to be immiserizing when fixed-price distortions are used. In contrast, fixed price protection to an import-substitute is less likely to induce immiserization via factor growth than ad valorem protection.