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Tariffs and sectoral adjustments in an open economy

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  • Turnovsky, Stephen J.

Abstract

This paper analyzes the impact of a tariff on sectoral adjustments in an economy which produces two traded consumption goods, one of which is exported, and a non-traded investment good. The importance of sectoral capital intensities is emphasized. In particular, the qualitative dynamic adjustment depends upon the relative capital intensities of the import-competing consumption good sector and the non-traded investment good sector. Sectoral labor allocation effects are analyzed and the long-run effect on aggregate capital accumulation is shown to depend upon the relative capital intensities of the import and export sectors. Temporary as well as permanent tariffs are discussed.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 15 (1991)
Issue (Month): 1 ()
Pages: 53-89

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Handle: RePEc:eee:dyncon:v:15:y:1991:i:1:p:53-89

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Web page: http://www.elsevier.com/locate/jedc

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References

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  1. Brock, Philip L., 1988. "Investment, the current account, and the relative price of non-traded goods in a small open economy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 235-253, May.
  2. Eichengreen, Barry J., 1981. "A dynamic model of tariffs, output and employment under flexible exchange rates," Journal of International Economics, Elsevier, vol. 11(3), pages 341-359, August.
  3. Sen, Partha & Turnovsky, Stephen J., 1989. "Deterioration of the terms of trade and capital accumulation: A re-examination of the Laursen-Metzler effect," Journal of International Economics, Elsevier, vol. 26(3-4), pages 227-250, May.
  4. Matsuyama, Kiminori, 1987. "Current account dynamics in a finite horizon model," Journal of International Economics, Elsevier, vol. 23(3-4), pages 299-313, November.
  5. Mussa, Michael, 1974. "Tariffs and the Distribution of Income: The Importance of Factor Specificity, Substitutability, and Intensity in the Short and Long Run," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1191-1203, Nov.-Dec..
  6. Krugman, Paul, 1982. "The macroeconomics of protection with a floating exchange rate," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 16(1), pages 141-182, January.
  7. Sebastian Edwards, 1987. "Tariffs, Terms or Trade, and The Real Exchange Rate in and Intertemporal Optimizing Model of the Current Account," UCLA Economics Working Papers 429, UCLA Department of Economics.
  8. Mussa, Michael, 1978. "Dynamic Adjustment in the Heckscher-Ohlin-Samuelson Model," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 775-91, October.
  9. Bruno, Michael, 1982. " Adjustment and Structural Change under Supply Shocks," Scandinavian Journal of Economics, Wiley Blackwell, vol. 84(2), pages 199-221.
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Citations

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Cited by:
  1. Bianconi, Marcelo, 1995. "Fiscal policy in a simple two-country dynamic model," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 395-419.
  2. Shinsuke Ikeda, 2003. "Tariffs, Time Preference, and the Current Account under Weakly Nonseparable Preferences," Review of International Economics, Wiley Blackwell, vol. 11(1), pages 101-113, February.
  3. Andrés Felipe Arias & Hernando Zuleta, . "Tasa de Cambio Real e Inversión. La Experiencia de 1990-1996," Borradores de Economia 076, Banco de la Republica de Colombia.
  4. Turnovsky, Stephen J & Bianconi, Marcelo, 1992. "The International Transmission of Tax Policies in a Dynamic World Economy," Review of International Economics, Wiley Blackwell, vol. 1(1), pages 49-72, November.
  5. Hwang, Yu-Ning & Turnovsky, Stephen J., 2013. "Exchange rate pass-through and the effects of tariffs on economic performance and welfare," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 81-102.
  6. Philip L. Brock & Stephen J. Turnovsky, 1993. "The Dependent Economy Model with Both Traded and Non-Traded Capital Goods," NBER Working Papers 4500, National Bureau of Economic Research, Inc.
  7. Javier Coto-Martinez & Huw Dixon, . "Fiscal Policy in an Imperfectly Competitive Dynamic Small Open Economy," Discussion Papers 99/19, Department of Economics, University of York.
  8. Coto-Martinez, Javier & Dixon, Huw, 2003. "Profits, markups and entry: fiscal policy in an open economy," Journal of Economic Dynamics and Control, Elsevier, vol. 27(4), pages 573-597, February.
  9. Erling Holmøy, 1998. "A General Equilibrium Evaluation of Aggregate Welfare Effects from Improved Sectoral Efficiency . Empirical Evidence for Norway," Discussion Papers 224, Research Department of Statistics Norway.
  10. Willenbockel, Dirk, 1999. "Dynamic applied general equilibrium trade policy analysis in the presence of foreign asset cross-ownership," Economic Modelling, Elsevier, vol. 16(3), pages 371-388, August.

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