Trade reforms, credibility, and development

Joshua Aizenman

Research output: Contribution to journalArticlepeer-review

10 Scopus citations


This paper analyzes the implications of uncertainty regarding the future course of trade liberalization on investment and policies. Uncertainty concerning the future tariff rate is shown to depress saving, and to operate as a subsidy (tax) on inward (outward) investment. We identify the need to tax (subsidize) private investment in the importable (exportable) sector. The elimination of sectorial private investment policies calls for a rise (drop) in the public/private capital ratio in the outward-oriented (inward-oriented) activities. In the presence of an external credit ceiling, a higher degree of risk aversion increases the magnitude (without changing the nature) of the policies.

Original languageEnglish
Pages (from-to)163-187
Number of pages25
JournalJournal of Development Economics
Issue number1
StatePublished - 1 Jan 1992
Externally publishedYes

ASJC Scopus subject areas

  • Development
  • Economics and Econometrics


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