Efficient barriers to trade: A sequential trade model with heterogeneous agents
AbstractThis 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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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Economics.
Volume (Year): 77 (2009)
Issue (Month): 2 (April)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505552
Optimal tariffs Sequential trade Demand uncertainty Terms of trade;
Other versions of this item:
- Benjamin Eden, 2007. "Efficient Barriers to Trade: A Sequential Trade Model with Heterogeneous Agents," Vanderbilt University Department of Economics Working Papers 0702, Vanderbilt University Department of Economics.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
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