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Does a larger country set a higher optimal tariff with monopolistic competition and capital accumulation?

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  • Naito, Takumi

Abstract

In a two-country endogenous growth model with monopolistic competition and capital accumulation, we show that: (i) a country’s optimal tariff is positive; and (ii) a more productive, and hence an economically larger, country sets a lower optimal tariff.

Suggested Citation

  • Naito, Takumi, 2022. "Does a larger country set a higher optimal tariff with monopolistic competition and capital accumulation?," Economics Letters, Elsevier, vol. 216(C).
    • Handle: RePEc:eee:ecolet:v:216:y:2022:i:c:s016517652200163x
    DOI: 10.1016/j.econlet.2022.110566
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    References listed on IDEAS

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    1. Balistreri, Edward J. & Hillberry, Russell H. & Rutherford, Thomas F., 2011. "Structural estimation and solution of international trade models with heterogeneous firms," Journal of International Economics, Elsevier, vol. 83(2), pages 95-108, March.
    2. Takumi Naito, 2019. "A larger country sets a lower optimal tariff," Review of International Economics, Wiley Blackwell, vol. 27(2), pages 643-665, May.
    3. Daron Acemoglu & Jaume Ventura, 2002. "The World Income Distribution," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 659-694.
    4. Gros, Daniel, 1987. "A note on the optimal tariff, retaliation and the welfare loss from tariff wars in a framework with intra-industry trade," Journal of International Economics, Elsevier, vol. 23(3-4), pages 357-367, November.
    5. Felbermayr, Gabriel & Jung, Benjamin & Larch, Mario, 2013. "Optimal tariffs, retaliation, and the welfare loss from tariff wars in the Melitz model," Journal of International Economics, Elsevier, vol. 89(1), pages 13-25.
    6. Hajime Takatsuka & Dao‐Zhi Zeng, 2022. "Mobile capital, optimal tariff, and tariff war," Review of International Economics, Wiley Blackwell, vol. 30(1), pages 166-204, February.
    7. Takumi Naito, 2021. "Can The Optimal Tariff Be Zero For A Growing Large Country?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(3), pages 1237-1280, August.
    8. Robert Dekle & Jonathan Eaton & Samuel Kortum, 2008. "Global Rebalancing with Gravity: Measuring the Burden of Adjustment," IMF Staff Papers, Palgrave Macmillan, vol. 55(3), pages 511-540, July.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Large country; Optimal tariff; Monopolistic competition; Capital accumulation; Endogenous growth;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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