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A tariff on a productive factor and import competing supply

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  • Henry Thompson

Abstract

A tariff on an imported factor of production such as energy or capital reduces the import as well as output in the general equilibrium of a small open economy. The present paper shows real income may rise, however, due to an increase in the import competing quantity supplied. The present competitive economy produces a single exported output with two factors of production, one purely domestic. The import competing price elasticity, shares of income and output, and factor substitution determine general equilibrium adjustments to a tariff on the imported factor.

Suggested Citation

  • Henry Thompson, 2016. "A tariff on a productive factor and import competing supply," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(1), pages 71-79, February.
    • Handle: RePEc:taf:jitecd:v:25:y:2016:i:1:p:71-79
    DOI: 10.1080/09638199.2015.1023334
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