Should Countries Worry About Immiserizing Growth?

In the presence of tariff protection, Johnson (1967) showed that factor accumulation in a two-good, two-factor model could reduce a country’s real income if it is biased sufficiently toward production of the tariff-protected good. This paper examines the exact conditions under which immiserization could occur in models with more than two goods or factors. In general, adding more goods beyond two seems to reduce the likely of immiserizing growth. This paper also examines how a country’s tariff structure affects the likelihood that it would suffer immiserization. In general, immiserization is more likely the further apart, i.e. the greater the degree of tariff dispersion. This result provides an additional rationale for adopting a uniform tariff structure.