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Optimal tariffs when production is fixed

  • José Méndez Naya

    (Universidade da Coruña)

  • Luciano Méndez Naya

    (Universidade de Santiago de Compostela)

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    The effects of tariff wars on welfare are analysed for the case of trade between two countries with fixed outputs of the traded good. Assuming mild conditions, it is shown that if there are non-zero tariffs for which welfare-maximizing equilibrium holds, then free trade is not strictly preferable when the coutries' output are equal, and if there are not equal is strictly disadvantageous to the country with the smaller output. It is also shown that welfare-maximizing equilibria do exist if the demand function is linear.

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    Paper provided by IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia in its series Documentos de trabajo - Analise Economica with number 0005.

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    Length: 28 pages
    Date of creation: 1998
    Date of revision:
    Handle: RePEc:edg:anecon:0005
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