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A Factor Tariff, Domestic Supply, and Income

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  • Henry Thompson

Abstract

A factor tariff raises the cost of production and reduces output in a small open neoclassical economy. In the present model the tariff also raises the price of the import competing factor, increasing its quantity supplied. Factor substitution, factor shares, and the price elasticity of factor supply determine adjustments to a factor tariff. Under some conditions, the tariff raises income. The model relates to economic growth and macroeconomic theory with an imported factor of production.

Suggested Citation

  • Henry Thompson, 2013. "A Factor Tariff, Domestic Supply, and Income," Auburn Economics Working Paper Series auwp2013-12, Department of Economics, Auburn University.
  • Handle: RePEc:abn:wpaper:auwp2013-12
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    File URL: http://cla.auburn.edu/econwp/Archives/2013/2013-12.pdf
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    References listed on IDEAS

    as
    1. Ruffin, Roy J, 1969. "Tariffs, Intermediate Goods, and Domestic Protection," American Economic Review, American Economic Association, vol. 59(3), pages 261-269, June.
    2. Lloyd A. Metzler, 1949. "Tariffs, International Demand, and Domestic Prices," Journal of Political Economy, University of Chicago Press, vol. 57, pages 345-345.
    3. Ferguson, D. G., 1978. "International capital mobility and comparative advantage : The two-country, two-factor case," Journal of International Economics, Elsevier, vol. 8(3), pages 373-396, August.
    4. Svensson, Lars E.O., 1984. "Factor trade and goods trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 365-378, May.
    5. Panagariya, Arvind, 1992. "Input tariffs, duty drawbacks, and tariff reforms," Journal of International Economics, Elsevier, vol. 32(1-2), pages 131-147, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Energy Tariffs; Factor Tariffs; General Equilibrium;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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