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A Partial Equilibrium Analysis Of Trade With Decreasing Transport Costs

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M. S. ALAM

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Abstract

Decreasing transport costs are incorporated into the standard partial equilibrium analysis of trade by allowing the divergence -- introduced by transport costs -- between export and import price to decrease with the volume of trade. When the excess demand (supply) curve is steeper than the long run average cost curve for imports (exports), we observe that an import (export) tariff raises (lowers) the domestic price by an amount exceeding the tariff. Further, when the excess demand (supply) curve is less steep than the long run average cost curve for imports (exports), the possibility exists that an import (export) tariff may lower (raise) the domestic price. These results lead to the important conclusion that tariffs cannot be used as measures of nominal protection across industries. [F10]

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Publisher Info
Article provided by Korean International Economic Association in its journal International Economic Journal.

Volume (Year): 5 (1991)
Issue (Month): 4 (December)
Pages: 63-69
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Handle: RePEc:taf:intecj:v:5:y:1991:i:4:p:63-69

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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. Cassing, James H, 1978. "Transport Costs in International Trade Theory: A Comparison with the Analysis of Nontraded Goods," The Quarterly Journal of Economics, MIT Press, vol. 92(4), pages 535-50, November. [Downloadable!] (restricted)
  2. Casas, F R, 1983. "International Trade with Produced Transport Services," Oxford Economic Papers, Oxford University Press, vol. 35(1), pages 89-109, March. [Downloadable!] (restricted)
  3. Falvey, Rodney E, 1976. "Transport Costs in the Pure Theory of International Trade," Economic Journal, Royal Economic Society, vol. 86(343), pages 536-50, September. [Downloadable!] (restricted)
  4. Casas, François R. & Choi, E. Kwan, 2003. "Some Paradoxes of Transport Costs in International Trade Theory," Staff General Research Papers 10606, Iowa State University, Department of Economics.
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  1. Muysken,J. & Sanders,M. & Zon,A.,Van, 1998. "Wage Divergence and Asymmetries in Unemployment in a Model with Biased Technical Change," Research Memoranda 023, Maastricht : MERIT, Maastricht Economic Research Institute on Innovation and Technology. [Downloadable!]
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