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In 1958, I analysed the paradoxical case of "immiserizing growth" [2] where a country, with monopoly power in trade, found that the growth-induced deterioration in its terms of trade implied a sufficiently large loss of welfare to outweigh the primary gain from growth. An obvious corollary of this proposition was that, if the country imposed an optimum tariff (either in both the pre-growth and the post-growth situations, or in the latter situation alone), this paradox would be eliminated.

James Melvin, in an interesting note [5], has now produced yet another analysis of immiserizing growth, where demand differences of the factor-intensity-reversals type are combined with international identity of production possibilities and growth therein to yield immiserization (for one of the two countries) which cannot be eliminated by the imposition of an optimum tariff (by the country experiencing immiserizing growth).

This paradox, in a world of paradoxes, is however readily resolved. It can be easily shown that the Bhagwati and Melvin examples of immiserizing growth belong to two quite different generic types; and that each, in turn, can be generalized to a different family of immiserizing growth possibilities. The former type can be eliminated by the introduction of optimal policies; the latter cannot.


Economics | Growth and Development | Law


Copyright © 1969 by the American Economic Association.