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The Optimal Tariff, Production Lags and Time Consistency

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  • Lapan, Harvey E.

Abstract

The optimal tariff for a large country equals the reciprocal of the foreign export elasticity of supply. However, if prod uction decisions occur before consumption decisions, the ex ante opti mal tariff is not time consistent because the ex post elasticity is l ess than the ex ante elasticity. The author shows all countries are w orse off if the large country cannot precommit to its ex ante optimal tariff, and that all countries can gain if the large country taxes d omestic production of importables.

Suggested Citation

  • Lapan, Harvey E., 1988. "The Optimal Tariff, Production Lags and Time Consistency," Staff General Research Papers Archive 10816, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:10816
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    1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    2. Enders, Walter & Lapan, Harvey E, 1982. "Social Security Taxation and Intergenerational Risk Sharing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(3), pages 647-658, October.
    3. Karni, Edi & Zilcha, Itzhak, 1989. "Aggregate and distributional effects of fair social security," Journal of Public Economics, Elsevier, pages 37-56.
    4. Feldstein, Martin, 1988. "The Effects of Fiscal Policies when Incomes Are Uncertain: A Contradiction to Ricardian Equivalence," American Economic Review, American Economic Association, pages 14-23.
    5. Gordon, Roger H. & Varian, Hal R., 1988. "Intergenerational risk sharing," Journal of Public Economics, Elsevier, pages 185-202.
    6. Samuelson, Paul A, 1975. "Optimum Social Security in a Life-Cycle Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 539-544, October.
    7. Weil, Philippe, 1987. "Love thy children : Reflections on the Barro debt neutrality theorem," Journal of Monetary Economics, Elsevier, pages 377-391.
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