Optimal tariffs when production is fixed
AbstractThe effects of tariff wars on welfare are analysed for the case of trade between two countries with fixed outputs of the traded good. Assuming mild conditions, it is shown that if there are non-zero tariffs for which welfare-maximizing equilibrium holds, then free trade is not strictly preferable when the coutries' output are equal, and if there are not equal is strictly disadvantageous to the country with the smaller output. It is also shown that welfare-maximizing equilibria do exist if the demand function is linear.
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Bibliographic InfoPaper provided by IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia in its series Documentos de trabajo - Analise Economica with number 0005.
Length: 28 pages
Date of creation: 1998
Date of revision:
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Commercial policy; Trade negotiations; Market Structure and Firms Strategy; Multinational Firms; Free Trade;
Find related papers by JEL classification:
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-05-29 (All new papers)
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