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Tariffs that may fail to protect: A model of trade and public goods

Author

Listed:
  • Rajit Biswas

    (Economic Research Unit, Indian Statistical Institute, Kolkata, India)

Abstract

This paper develops a model of small open economy, with a differentiated goods sector and voluntary provisioning of public good. It is shown that trade policy can alter the quantity of public good provided in the equilibrium. Interestingly, tariffs may fail to protect, leading to a Metzler Paradox like situation. This is because the income effect generated due to the imposition of tariff can lead to an increase in the contribution to the public good. An expanding public sector crowds out the import competing sector. This result holds unambiguously in the neighbourhood of free trade.

Suggested Citation

  • Rajit Biswas, 2015. "Tariffs that may fail to protect: A model of trade and public goods," Economics Bulletin, AccessEcon, vol. 35(1), pages 361-370.
    • Handle: RePEc:ebl:ecbull:eb-14-00555
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    File URL: http://www.accessecon.com/Pubs/EB/2015/Volume35/EB-15-V35-I1-P40.pdf
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    Cited by:

    1. Rajit Biswas & Kumar Shubham, 2018. "Tariffs, Efficiency Wages and Unemployment," Journal of Industry, Competition and Trade, Springer, vol. 18(4), pages 503-511, December.

    More about this item

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    JEL classification:

    • F1 - International Economics - - Trade
    • F0 - International Economics - - General

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