ABSTRACT
These findings establish a sharp contrast between redistribution attainable by means of distorting tariffs and redistribution attainable by non-distorting lump-sum Grandmont-McFadden-Grinols (GMG) compensation. Moreover, they carry the possibly disturbing implication that an import subsidy and/or an export tax may be necessary elements of a pure tariff reform, that is, a tariff reform unaccompanied by international transfers. Finally, they generalize the classical gains-from-trade proposition, in which the initial tariffs are jointly prohibitive and in which all new tariffs are zero; see Kemp and Wan (1972: Theorem 1). They also generalize a more recent gains-from-trade proposition, in which the initial tariffs are jointly prohibitive for each country and in which all new tariffs, whether on imports or exports, are non-negative and jointly prohibitive for no country; see Kemp and Wan (1972: Theorem 1). However, these generalizations are available only in a two-by-two setting; Kemp and Wan (2005) have provided a three-by-three example in which propositions (a) and (c), and therefore the above generalizations of the two gains-from-trade propositions, do not hold.
