Grossman-Helpman's Manipulating Protectionism Theory

Abstract

This paper disproves both the theory by Grossman and Helpman. When they have merely reproduced the tax incidence theory, their complicated methods are unnecessary. When a higher optimal tax rate means lower revenue, such theory is not optimizing. A ridiculous tax rate for the suppliers destroys their theory completely. When their original objective is reinstated, this paper proves that the optimal tax or tariff rate must be zero. Grossman and Helpman have nothing to sell.