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A Factor Tariff, Domestic Supply, and Income

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  • Henry Thompson

Abstract

A factor tariff raises the cost of production and reduces output in a small open neoclassical economy. In the present model the tariff also raises the price of the import competing factor, increasing its quantity supplied. Factor substitution, factor shares, and the price elasticity of factor supply determine adjustments to a factor tariff. Under some conditions, the tariff raises income. The model relates to economic growth and macroeconomic theory with an imported factor of production.

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File URL: http://cla.auburn.edu/econwp/Archives/2013/2013-12.pdf
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Paper provided by Department of Economics, Auburn University in its series Auburn Economics Working Paper Series with number auwp2013-12.

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Date of creation: Aug 2013
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Handle: RePEc:abn:wpaper:auwp2013-12

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Keywords: Energy Tariffs; Factor Tariffs; General Equilibrium;

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  1. Lars E.O. Svensson, 1982. "Factor Trade and Goods Trade," NBER Working Papers 0999, National Bureau of Economic Research, Inc.
  2. Lloyd A. Metzler, 1949. "Tariffs, International Demand, and Domestic Prices," Journal of Political Economy, University of Chicago Press, vol. 57, pages 345.
  3. Panagariya, Arvind, 1992. "Input tariffs, duty drawbacks, and tariff reforms," Journal of International Economics, Elsevier, vol. 32(1-2), pages 131-147, February.
  4. Ruffin, Roy J, 1969. "Tariffs, Intermediate Goods, and Domestic Protection," American Economic Review, American Economic Association, vol. 59(3), pages 261-69, June.
  5. Ferguson, D. G., 1978. "International capital mobility and comparative advantage : The two-country, two-factor case," Journal of International Economics, Elsevier, vol. 8(3), pages 373-396, August.
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