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The Optimal Tariff, Production Lags and Time Consistency

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Author Info
Lapan, Harvey E.

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Abstract

The optimal tariff for a large country equals the reciprocal of the foreign export elasticity of supply. However, if prod uction decisions occur before consumption decisions, the ex ante opti mal tariff is not time consistent because the ex post elasticity is l ess than the ex ante elasticity. The author shows all countries are w orse off if the large country cannot precommit to its ex ante optimal tariff, and that all countries can gain if the large country taxes d omestic production of importables.

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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 10816.

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Date of creation: 24 Oct 2003
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Publication status: Published in American Economic Review, June 1988, Vol. 78, No. 3, pp. 395-340.
Handle: RePEc:isu:genres:10816

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  1. Mohammad Amin, 2004. "Time Inconsistency of Trade Policy and Multilateralism," International Trade 0402002, EconWPA. [Downloadable!]
  2. Julio J. Rotemberg & Garth Saloner, 1990. "Competition and Human Capital Accumulation: A Theory of Interregional Specialization and Trade," NBER Working Papers 3228, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Kyle Bagwell & Robert W. Staiger, 2000. "GATT-Think," NBER Working Papers 8005, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
    • Kyle Bagwell & Robert W. Staiger, 2002. "GATT-think," Discussion Papers 0102-39, Columbia University, Department of Economics. [Downloadable!]
  4. William Milberg, 1999. "The Rhetoric of Policy Relevance in International Economics," Macroeconomics 9904009, EconWPA. [Downloadable!]
  5. Richard Chisik & Ronald B. Davies, 2001. "Gradualism in Tax Treaties with Irreversible Foreign Direct Investment," Working Papers 0201, Florida International University, Department of Economics. [Downloadable!]
    Other versions:
  6. Tigran A. Melkonian & Stanley R. Johnson, 1998. "State Trading Companies, Time Inconsistency, Imperfect Enforceability and Reputation," Center for Agricultural and Rural Development (CARD) Publications 98-wp192, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
  7. Peter Welzel, 1992. "A note on the time inconsistency of strategic trade policy," Open Economies Review, Springer, vol. 3(2), pages 203-214, June. [Downloadable!] (restricted)
  8. Lapan, Harvey E. & Melkonyan, Tigran, 2002. "Trade Policy under Asymmetric Information," Staff General Research Papers 10026, Iowa State University, Department of Economics. [Downloadable!]
  9. K.C. Fung & Robert W. Staiger, 1994. "Trade Liberalization and Trade Adjustment Assistance," NBER Working Papers 4847, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Jean-Philippe Gervais, 2001. "Production uncertainty and trade policy commitment," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 10(1), pages 1-21, March. [Downloadable!] (restricted)
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