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Efficient barriers to trade: A sequential trade model with heterogeneous agents

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Author Info
Eden, Benjamin

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Abstract

This paper studies the choice of tariffs and other type of consumption taxes and subsidies in a flexible price version of the Prescott [Prescott, Edward C., 1975. Efficiency of the Natural Rate. Journal of Political Economy 83, 1229-1236.] hotels model. It is shown that a country with unstable demand may benefit from a tariff on imports. More surprisingly, the exporting country may also benefit from the tariff. In general, I consider the problem of a world planner who chooses country specific consumption taxes and subsidies. I show that buyers in countries that tend to consume relatively more in the high demand state should be taxed and buyers in countries that tend to consume relatively more in the low demand state should be subsidized.

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Publisher Info
Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 77 (2009)
Issue (Month): 2 (April)
Pages: 234-244
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Handle: RePEc:eee:inecon:v:77:y:2009:i:2:p:234-244

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Web page: http://www.elsevier.com/locate/inca/505552

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Related research
Keywords: Optimal tariffs Sequential trade Demand uncertainty Terms of trade;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. James D. Dana & Jr., 1998. "Advance-Purchase Discounts and Price Discrimination in Competitive Markets," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 395-422, April. [Downloadable!] (restricted)
  2. Robert E. Lucas, Jr. & Michael Woodford, 1993. "Real Effects of Monetary Shocks in an Economy with Sequential Purchases," NBER Working Papers 4250, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Prescott, Edward C, 1975. "Efficiency of the Natural Rate," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1229-36, December. [Downloadable!] (restricted)
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This page was last updated on 2009-11-22.

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