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Aspects of the Theory of Tariffs (Collected Works of Harry Johnson) by Harry Johnson

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7.    Two Notes on Tariffs, Distortions and Growth*

I. THE POSSIBILITY OF INCOME LOSSES FROM INCREASED EFFICIENCY OR FACTOR ACCUMULATION IN THE PRESENCE OF TARIFFS1

The adoption of more efficient technology and the accumulation of factors of production are generally assumed to increase the real income available to an economy. But when a country is following a protective policy improved efficiency in the protected industry or accumulation of the factor used intensively in that industry will actually reduce the country’s real income, over a range of change set by the degree of protection. This possibility of income-reducing growth is relevant to the fact that countries industrialising by means of protectionist and import-substitution policies are ...

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