Lumpsum versus Non-lumpsum Redistribution: A Second Glance

It has been argued by Turunen-Red and Woodland that, on only mild empirical assumptions, any system of non-distorting international transfers can be replaced by an "equivalent set" of distorting national tariffs without disturbing the international allocation of resources. This remarkable claim is disputed on the ground that the assumptions required for equivalence are not mild, that in particular they rule out quite plausible models of Arrow-Debreu type, and on the further ground that, in a context of non-uniqueness, a set of tariffs which supports an initial transferridden equilibrium might also support several quite different equilibria. An alternative proposition is proposed.