second-best argument for protection

Definitions

Economics

  • Any argument for protection that can be countered by pointing to a different and less distortionary policy that would achieve the same desired result at lower economic cost.
  • An argument for protection to partially correct an existing distortion in the economy when the first-best policy for that purpose is not available. For example, if domestic production generates a positive externality and a production subsidy to internalize it is not available, then a tariff may be second best optimal.
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