Tariffs in an Economy with Incomplete Markets and Unemployment
AbstractThis paper examines the optimal labor contract in a small open economy with incomplete markets under international price uncertainty. The effect on employment, wages, and profits of different realizations of the state of nature is studied and agents' preferences concerning the implementation of a tariff are determined. The implicit contract equilibrium is shown to be constrained Pareto optimal; unanticipated tariff policy cannot be Pareto improving over free trade.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2705.
Date of creation: Sep 1988
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