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Welfare Improving Prohibitive Tariffs

Author

Listed:
  • Sugata Marjit
  • Suryaprakash Misra
  • Tarun Kabiraj
  • Lei Yang

Abstract

We consider welfare impacts of prohibitive tariffs on trading partners. Initially, there is prohibitive tariff by one country and a zero tariff by its trading partner. Thereafter, the trading partner also resorts to prohibitive tariff. We demonstrate how prohibitive tariffs by the trading partners can unambiguously increase welfare for both the countries through international transfer of technology. The critical and novel proposition of the paper is that the country targeted for retaliation with a prohibitive tariff would welcome such a move for welfare reasons.

Suggested Citation

  • Sugata Marjit & Suryaprakash Misra & Tarun Kabiraj & Lei Yang, 2026. "Welfare Improving Prohibitive Tariffs," CESifo Working Paper Series 12396, CESifo.
    • Handle: RePEc:ces:ceswps:_12396
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    References listed on IDEAS

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    1. Marjit, Sugata, 1988. "A simple model of technology transfer," Economics Letters, Elsevier, vol. 26(1), pages 63-67.
    2. Rajat Acharyya & Sugata Marjit, 2023. "Why trade when you can transfer the technology: Revisiting Smith and Ricardo," Review of International Economics, Wiley Blackwell, vol. 31(4), pages 1508-1527, September.
    3. Kabiraj, Tarun & Marjit, Sugata, 1993. "International technology transfer under potential threat of entry : A Cournot-Nash framework," Journal of Development Economics, Elsevier, vol. 42(1), pages 75-88, October.
    4. Brander, James A., 1995. "Strategic trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 27, pages 1395-1455, Elsevier.
    5. Kabiraj, Tarun & Marjit, Sugata, 2003. "Protecting consumers through protection: The role of tariff-induced technology transfer," European Economic Review, Elsevier, vol. 47(1), pages 113-124, February.
    6. Amy Jocelyn Glass & Kamal Saggi, 2023. "Multinational Firms and Technology Transfer," World Scientific Book Chapters, in: Kamal Saggi (ed.), Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, chapter 7, pages 169-187, World Scientific Publishing Co. Pte. Ltd..
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    Keywords

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    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality

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