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Nominal and Optimum Tariffs under Variable Returns to Scale


  • Choi, Jai-Young
  • Yu, Eden S H


This paper analyzes the effects of a tariff on the import demand, the terms of trade, and the domesti c price ratio in a large-country framework incorporating variable ret urns to scale. It is shown that an improvement in the terms of trade for a given tariff may dampen the demand for imports, while a higher tariff for given terms of trade may raise it. An increase in the rate of tariff need not improve the terms of trade and hence may raise th e domestic price ratio of the importable commodity by more than the t ariff rates. Copyright 1987 by Royal Economic Society.

Suggested Citation

  • Choi, Jai-Young & Yu, Eden S H, 1987. "Nominal and Optimum Tariffs under Variable Returns to Scale," Oxford Economic Papers, Oxford University Press, vol. 39(4), pages 785-798, December.
  • Handle: RePEc:oup:oxecpp:v:39:y:1987:i:4:p:785-98

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    References listed on IDEAS

    1. 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.
    2. Sen, Partha & Turnovsky, Stephen J, 1989. "Tariffs, Capital Accumulation, and the Current Account in a Small Open Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 811-831, November.
    3. Matsuyama, Kiminori, 1987. "Current account dynamics in a finite horizon model," Journal of International Economics, Elsevier, vol. 23(3-4), pages 299-313, November.
    4. J. P. Gould, 1968. "Adjustment Costs in the Theory of Investment of the Firm," Review of Economic Studies, Oxford University Press, vol. 35(1), pages 47-55.
    5. Robert E. Lucas & Jr., 1967. "Adjustment Costs and the Theory of Supply," Journal of Political Economy, University of Chicago Press, vol. 75, pages 321-321.
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    Cited by:

    1. Chao, Chi-Chur & Yu, Eden S. H., 1995. "The shadow price of foreign exchange in a dual economy," Journal of Development Economics, Elsevier, vol. 46(1), pages 195-202, February.
    2. Choi, Jai-Young & Price, Donald I. & Allen, C. Larry, 1997. "Further implications of tariffs in the mobile capital Harris-Todaro model," International Review of Economics & Finance, Elsevier, vol. 6(1), pages 87-102.

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