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Tariff Wars and Trade Deals with Costly Government

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  • John B. Burbidge
  • Gordon M. Myers

Abstract

We study a simple model of tariff wars and trade deals in which government revenue collection and disbursement uses resources. The introduction of costly governments leads to lower non–cooperative tariffs, the possibility that a less costly government may win a tariff war, and fully cooperative trade deals where countries lower tariffs but do not eliminate them, even with lump–sum taxes and transfers.

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File URL: http://socserv.mcmaster.ca/econ/rsrch/papers/archive/2000-05.pdf
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Bibliographic Info

Paper provided by McMaster University in its series Department of Economics Working Papers with number 2000-05.

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Length: 17 pages
Date of creation: May 2000
Date of revision:
Handle: RePEc:mcm:deptwp:2000-05

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  1. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
  2. Burbidge, John B. & James A. DePater & Gordon M. Meyers & Abhijit Sengupta, 1997. "A Coalition-Formation Approach to Equilibrium Federations and Trading Blocs," American Economic Review, American Economic Association, vol. 87(5), pages 940-56, December.
  3. Kennan, John & Riezman, Raymond, 1988. "Do Big Countries Win Tariff Wars?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 81-85, February.
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