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Tariff reforms with rigid wages

  • Rod Falvey
  • Udo Kreickemeier

    ()

This paper analyses the effects of tariff reforms on welfare and market access in a competitive small open economy that is characterised by involuntary unemployment due to non-market clearing wages that are fixed either in terms of the numeraire or in real terms. We show that recent tariff-reform results can be extended to integrated reforms of tariffs and the wage rate, and that the inherent tension between reforms that increase welfare and market access carry over. We also derive welfare increasing tariff-reform strategies that keep the wage rate constant, and show that this tension may be attenuated.

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File URL: http://hdl.handle.net/10.1007/s00199-008-0382-4
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Article provided by Springer in its journal Economic Theory.

Volume (Year): 41 (2009)
Issue (Month): 1 (October)
Pages: 23-39

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Handle: RePEc:spr:joecth:v:41:y:2009:i:1:p:23-39
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  1. James E. Anderson & J. Peter Neary, 2004. "Welfare versus Market Access: The Implications of Tariff Structure for Tariff Reform," Boston College Working Papers in Economics 601, Boston College Department of Economics.
  2. Neary, J Peter, 1989. "Trade Liberalization and Shadow Prices in the Presence of Tariffs and Quotas," CEPR Discussion Papers 345, C.E.P.R. Discussion Papers.
  3. Hatta, Tatsuo, 1977. "A Recommendation for a Better Tariff Structure," Econometrica, Econometric Society, vol. 45(8), pages 1859-69, November.
  4. Udo Kreickemeier, 2005. "Unemployment and the welfare effects of trade policy," Canadian Journal of Economics, Canadian Economics Association, vol. 38(1), pages 194-210, February.
  5. Ju, Jiandong & Krishna, Kala, 2000. "Welfare and market access effects of piecemeal tariff reform," Journal of International Economics, Elsevier, vol. 51(2), pages 305-316, August.
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