The Optimal Tariff, Production Lags and Time Consistency
AbstractThe 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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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 10816.
Date of creation: 01 Jun 1988
Date of revision:
Publication status: Published in American Economic Review, June 1988, vol. 78 no. 3, pp. 395-340
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Other versions of this item:
- Lapan, Harvey E, 1988. "The Optimal Tariff, Production Lags, and Time Consistency," American Economic Review, American Economic Association, vol. 78(3), pages 395-401, June.
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