ABSTRACT
This chapter aims to derive a rent transformation frontier that describes the combinations of Pareto-efficient distribution of rental incomes, and to study its nature and comparative static properties. It provides an interface between the economic and the political spheres of the political economy. Given the world relative price, domestic factor endowments, technologies and tastes, a general economic equilibrium can be defined for each level of the tariff rate. A product transformation, in equilibrium, under the maintained hypothesis that production sectors are profit maximizers, can always be induced by a change in the domestic relative price of commodities. Changes in the endowment of factors in the economy bring about changes in the capacity of the economy to produce. Any change in the endowment of factors causes a shift in the frontier and a change in the tariff rate or the international price ratio will cause a movement along the frontier.
