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The Growth and Welfare Consequences of Differential Tariffs

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  • Brock, Philip L
  • Turnovsky, Stephen J

Abstract

This paper analyzes the impact of differential tariffs on consumption and investment in a specific factors model of a small open economy in which capital is accumulated over time. Particular attention is devoted to the welfare aspects, highlighting the cost of the intertemporal distortions produced by protective trade policies. Several specific welfare propositions are obtained. First, tariff protection is shown to create short-run benefits but long-run costs in welfare. Second, the second-best policy for the two tariffs is characterized. Finally, several propositions summarizing the implications of the authors' analysis for tariff reform are derived. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 34 (1993)
Issue (Month): 4 (November)
Pages: 765-94

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Handle: RePEc:ier:iecrev:v:34:y:1993:i:4:p:765-94

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Cited by:
  1. Jenny Ligthart & Gerard C. van der Meijden, 2010. "Coordinated Tax-Tariff Reforms, Informality, and Welfare Distribution," CESifo Working Paper Series 3107, CESifo Group Munich.
  2. John Fender & Chong K. Yip, 1998. "Tariffs and Exchange Rate Dynamics Redux," Departmental Working Papers _105, Chinese University of Hong Kong, Department of Economics.
  3. Osang, Thomas & Turnovsky, Stephen J., 2000. "Differential tariffs, growth, and welfare in a small open economy," Journal of Development Economics, Elsevier, vol. 62(2), pages 315-342, August.
  4. Petrucci, Alberto, 2006. "Wealth Accumulation and Growth in a Specific-Factors Model of Trade and Finance," Economics & Statistics Discussion Papers esdp06029, University of Molise, Dept. EGSeI.
  5. 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.
  6. Yano, Makoto & Honryo, Takakazu, 2010. "Trade imbalances and harmonization of competition policies," Journal of Mathematical Economics, Elsevier, vol. 46(4), pages 438-452, July.
  7. 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.
  8. Turnovsky, Stephen J., 1996. "Fiscal policy, growth, and macroeconomic performance in a small open economy," Journal of International Economics, Elsevier, vol. 40(1-2), pages 41-66, February.
  9. Guillo, Maria Dolores & Perez-Sebastian, Fidel, 2007. "The curse and blessing of fixed specific factors in small-open economies," Journal of Development Economics, Elsevier, vol. 82(1), pages 58-78, January.
  10. Osang, Thomas & Pereira, Alfredo, 1996. "Import tariffs and growth in a small open economy," Journal of Public Economics, Elsevier, vol. 60(1), pages 45-71, April.
  11. Dinopoulos, Elias & Segerstrom, Paul, 1999. "The dynamic effects of contingent tariffs," Journal of International Economics, Elsevier, vol. 47(1), pages 191-222, February.
  12. Dinopoulos, Elias & Syropoulos, Constantinos, 1997. "Tariffs and Schumpeterian growth," Journal of International Economics, Elsevier, vol. 42(3-4), pages 425-452, May.

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