Comparative Advantage and Government Budget Effects: An Application to the Grain Trade of the Former USSR
1997
Liefert, William
A model is developed for analyzing the relationship between trade according to comparative advantage, price policy, and government budget effects. The model is used to examine a debate in the USSR in its last years concerning the economic rationale of grain imports, one concern being government budgetary consequences. It appears that changing the mix of goods produced and traded such that grain imports would fall, which many Soviet economists advocated, would have unintentionally decreased state revenue. This is mainly because empirical evidence indicates that the former USSR had a comparative disadvantage in the production of grain.
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