Immiserising Growth with Globally Optimal Policies
Abstract
Immiserizing growth is impossible when the growing country follows nationally optimal policies and the growth stimulates no foreign reaction. However, this solution may leave other nations with sub‐optimal policies, and it may lead to a global misallocation of resources. It is demonstrated that immiserising growth caused by a deterioration in the term of trade is possible when globally optimal policy rules are followed. Both weak global optimality, where all nations follow nationally optimal policies, and strong global optimality, where an efficient world allocation of resources is maintained, are examined. However, when the terms of trade are not determined by market power, for instance under discriminatory pricing or by bilateral negotiation, immiserising growth is unlikely.
Keywords
Citation
Kaempfer, W.G. (1989), "Immiserising Growth with Globally Optimal Policies", Journal of Economic Studies, Vol. 16 No. 1. https://doi.org/10.1108/EUM0000000000127
Publisher
:MCB UP Ltd
Copyright © 1989, MCB UP Limited