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Import Tariffs and Growth in a Model with Habits

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  • Chen, Been-Lon
  • Lee, Shun-Fa

Abstract

This paper studies the relationship between tariffs and economic growth in a two-country AK growth model. We find that a sufficiently higher tariff can increase or decrease economic growth, which depends on the levels of productivity coefficients in both countries. Moreover, the Ricardian theorem of comparative advantage holds in the long-run equilibrium and local indeterminacy emerges in the case of incomplete specialization under milder conditions compared with conventional literature.

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File URL: http://mpra.ub.uni-muenchen.de/27667/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27667.

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Date of creation: 01 Sep 2007
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Handle: RePEc:pra:mprapa:27667

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Keywords: AK growth model; two-country; tariffs; growth; indeterminacy;

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References

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  1. Jody Overland & Christopher D. Carroll & David N. Weil, 2000. "Saving and Growth with Habit Formation," American Economic Review, American Economic Association, vol. 90(3), pages 341-355, June.
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  10. Jaime Alonso-Carrera & Jordi Caballe & Xavier Raurich, 2001. "Consumption Externalities, Habit Formation, and Equilibrium Efficiency," UFAE and IAE Working Papers 499.01, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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  21. Walter Fisher & Franz Hof, 2000. "Relative consumption, economic growth, and taxation," Journal of Economics, Springer, vol. 72(3), pages 241-262, October.
  22. O'Rourke, Kevin H, 1997. "Tariffs and Growth in the Late Nineteenth Century," CEPR Discussion Papers 1700, C.E.P.R. Discussion Papers.
  23. Harald Uhlig & Lars Ljungqvist, 2000. "Tax Policy and Aggregate Demand Management under Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 90(3), pages 356-366, June.
  24. Kazuo Nishimura & Koji Shimomura, 2006. "Indeterminacy in a dynamic two-country model," Economic Theory, Springer, vol. 29(2), pages 307-324, October.
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Cited by:
  1. Lee, Shun-Fa, 2010. "Tariff, Growth, and Welfare," MPRA Paper 27486, University Library of Munich, Germany.

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