On Functionally Distributed Quotas

We consider “functionally distributed” quotas, where trade is restricted to a function of another economic activity, paying special attention to the ratio constraint and its relation to “proportionally distributed” quotas. We propose a simple principle defining the optimal policy under a functionally defined restriction, extend the analysis of ratio import/production constraints to general equilibrium, introduce export constraints, and constraints defined in proportion to factor use. We develop the general‐equilibrium geometry of functional trade constraints and the concomitant optimal policies, deriving a “quota locus” that depicts the consumption possibilities under various regimes.