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Tariffs and sectoral adjustments in an open economy

  • Turnovsky, Stephen J.

This paper analyzes the impact of a tariff on sectoral adjustments in an economy which produces two traded consumption goods, one of which is exported, and a non-traded investment good. The importance of sectoral capital intensities is emphasized. In particular, the qualitative dynamic adjustment depends upon the relative capital intensities of the import-competing consumption good sector and the non-traded investment good sector. Sectoral labor allocation effects are analyzed and the long-run effect on aggregate capital accumulation is shown to depend upon the relative capital intensities of the import and export sectors. Temporary as well as permanent tariffs are discussed.

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File URL: http://www.sciencedirect.com/science/article/B6V85-45N4YNB-5/2/ee2424c322b09b4edf33ae7be436915b
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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 15 (1991)
Issue (Month): 1 ()
Pages: 53-89

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Handle: RePEc:eee:dyncon:v:15:y:1991:i:1:p:53-89
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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  1. Matsuyama, Kiminori, 1987. "Current account dynamics in a finite horizon model," Journal of International Economics, Elsevier, vol. 23(3-4), pages 299-313, November.
  2. Mussa, Michael, 1974. "Tariffs and the Distribution of Income: The Importance of Factor Specificity, Substitutability, and Intensity in the Short and Long Run," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1191-1203, Nov.-Dec..
  3. Krugman, Paul, 1982. "The macroeconomics of protection with a floating exchange rate," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 16(1), pages 141-182, January.
  4. Partha Sen & Stephen J. Turnovsky, 1988. "Deterioration of the Terms of Trade and Capital Accumulation: A Reexamination of the Laursen-Metzler Effect," NBER Working Papers 2616, National Bureau of Economic Research, Inc.
  5. Brock, Philip L., 1988. "Investment, the current account, and the relative price of non-traded goods in a small open economy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 235-253, May.
  6. Sebastian Edwards, 1987. "Tariffs, Terms of Trade, and the Real Exchange Rate in an Intertemporal Optimizing Model of the Current Account," NBER Working Papers 2175, National Bureau of Economic Research, Inc.
  7. Bruno, Michael, 1982. " Adjustment and Structural Change under Supply Shocks," Scandinavian Journal of Economics, Wiley Blackwell, vol. 84(2), pages 199-221.
  8. Mussa, Michael, 1978. "Dynamic Adjustment in the Heckscher-Ohlin-Samuelson Model," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 775-91, October.
  9. Eichengreen, Barry J., 1981. "A dynamic model of tariffs, output and employment under flexible exchange rates," Journal of International Economics, Elsevier, vol. 11(3), pages 341-359, August.
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