Terms of Trade Shocks and Domestic Prices under Tariffs and Quotas: A Note
AbstractThe paper develops a two-good, small country, general equilibrium trade model with endogenous labour supply, where trade is restricted by a tariff or an import quota. Within this framework, it is shown that, contrary to Anam (1989), under an import quota domestic and world prices may vary in the same direction. This is due to the possible positive employment effects of terms of trade shocks. In such a case, compared to fixed labour supply, variable labour supply is likely to make the domestic prices less sensitive to foreign price volatility.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2593.
Date of creation: Oct 2000
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Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
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- Michael S. Michael, 1992. "International Factor Mobility, Non-traded Goods, Tariffs, and the Terms of Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 25(2), pages 493-99, May.
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