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Tariffs, Time Preference, and the Current Account under Weakly Nonseparable Preferences

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  • Shinsuke Ikeda

    (Osaka University, Japan)

Abstract

Incorporating weakly nonseparable preferences into the familiar time--preference model, the author emphasizes a role of steady--state welfare changes in determining the effect of permanent tariffs on the current account. The effect consists of a welfare effect, due to steady--state welfare changes, which is negative (positive) when preferences toward imports are more (less) wealth--enhanced than toward exports; and a substitution effect, which occurs only with initial distortion. Even without initial distortion, a marginal tariff has a first--order welfare effect on the current account. Its sign does not depend on whether impatience is increasing or decreasing in wealth. Copyright Blackwell Publishing Ltd. 2003

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 11 (2003)
Issue (Month): 1 (February)
Pages: 101-113

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Handle: RePEc:bla:reviec:v:11:y:2003:i:1:p:101-113

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  1. van Wijnbergen, Sweder, 1984. "Tariffs, Employment and the Current Account: Real Wage Resistance and the Macroeconomics of Protectionism," CEPR Discussion Papers 30, C.E.P.R. Discussion Papers.
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  18. Ostry, Jonathan D. & Rose, Andrew K., 1992. "An empirical evaluation of the macroeconomic effects of tarrifs," Journal of International Money and Finance, Elsevier, vol. 11(1), pages 63-79, February.
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Cited by:
  1. Yoshiyasu Ono, 2006. "Protective Trade Policies 'Reduce' Employment: A Dynamic Optimization Approach," ISER Discussion Paper 0659, Institute of Social and Economic Research, Osaka University.

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