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General Equilibrium Effects of Import Constraints under Variable Labour Supply, Public Goods and Income Taxation

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  • Michael S. Michael
  • Panos Hatzipanayotou

Abstract

We consider a general equilibrium trade model of a small open economy with a representative consumer, where labour supply is variable, where imports are restricted by a small tariff, a quota or a voluntary export restraint (VER), and where alongside the production of two traded goods—one imported and one exported—a pure public good is produced and funded through an income tax. Within this framework, we demonstrate, among other things, that under certain conditions, while a small tariff or quota reduces employment and welfare, a VER may increase them. Thus, in the context of a small open economy, contrary to standard results, in certain cases VERs may become the welfare‐ and employment‐dominant instrument over the alternative import restrictions.

Suggested Citation

  • Michael S. Michael & Panos Hatzipanayotou, 1999. "General Equilibrium Effects of Import Constraints under Variable Labour Supply, Public Goods and Income Taxation," Economica, London School of Economics and Political Science, vol. 66(263), pages 389-401, August.
    • Handle: RePEc:bla:econom:v:66:y:1999:i:263:p:389-401
    DOI: 10.1111/1468-0335.00177
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    Cited by:

    1. Udo Kreickemeier, 2017. "Unemployment and the Welfare Effects of Trade Policy," World Scientific Book Chapters, in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 3, pages 73-94, World Scientific Publishing Co. Pte. Ltd..
    2. Michael Haliassos, 2003. "Stockholding: Recent Lessons from Theory and Computations," Palgrave Macmillan Books, in: Luigi Guiso & Michael Haliassos & Tullio Jappelli (ed.), Stockholding in Europe, chapter 2, pages 30-49, Palgrave Macmillan.
    3. Takumi HAIBARA & Hiroshi OHTA, 2011. "A New Proposal of Ecological Tax Reform," GSICS Working Paper Series 24, Graduate School of International Cooperation Studies, Kobe University.
    4. Chao, Chi-Chur & Hazari, Bharat R. & Sgro, Pasquale M. & Laffargue, Jean-Pierre & Yu, Eden S.H., 2005. "Tourism, Jobs, Capital Accumulation and the Economy: A Dynamic Analysis," Natural Resources Management Working Papers 12149, Fondazione Eni Enrico Mattei (FEEM).
    5. Panos Pashardes & Soteroula Hajispyrou, 2002. "Consumer Demand and Welfare under Increasing Block Pricing," University of Cyprus Working Papers in Economics 0207, University of Cyprus Department of Economics.
    6. Panos Hatzipanayotou & Sajal Lahiri & Michael S. Michael, 2002. "Reforms of Environmental Policies in the Presence of Cross-border Pollution and two Stage Clean Up," University of Cyprus Working Papers in Economics 0203, University of Cyprus Department of Economics.
    7. Chi‐Chur Chao & Bharat R. Hazari & Eden S. H. Yu, 2010. "Quotas, Spillovers, and the Transfer Paradox in an Economy with Tourism," Review of International Economics, Wiley Blackwell, vol. 18(2), pages 243-249, May.

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