Export taxes versus buffer stocks as optimal export policies under uncertainty
1981
Sarris, A.H.
Extract: In this paper, the optimal export tax policy for a monopolistic exporter is compared with an optimal buffer stock policy also operated by the exporter. Both policies operate ex post, namely, after the state of nature is revealed. Under the assumption of no storage cost, the optimal buffer stock policy is derived as a feedback rule and is such that the international price is not completely stabilized at its mean as all of the earlier price stabilization literature has assumed. Comparing the expected net exporter benefits and domestic price variances from the two schemes, an intuitively simple condition is derived that depends on the price elasticities of export supply and import demand and that dictates the preference of one versus the other.
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