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The Growth and Welfare Consequences of Differential Tariffs With Endogenously-Supplied Capital and Labor

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  • Philip L. Brock
  • Stephen J. Turnovsky

Abstract

This paper analyzes the impact of differential tariffs on consumption and investment in a specific factors model of a small open economy in which capital is accumulated over time. Particular attention is devoted to the welfare aspects. highlighting the cost of the intertemporal distortions produced by protective trade policies. Several specific welfare propositions are obtained. First, tariff protection is shown to create short-run benefits but long-run costs in welfare. Secondly, the second-best policy for the two tariffs is characterized. Finally, several propositions summarizing the implications of our analysis for tariff reform are derived.

Suggested Citation

  • Philip L. Brock & Stephen J. Turnovsky, 1992. "The Growth and Welfare Consequences of Differential Tariffs With Endogenously-Supplied Capital and Labor," NBER Working Papers 4011, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4011
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    Cited by:

    1. Christian Keuschnigg, 1996. "Overshooting adjustment to tariff liberalization," Open Economies Review, Springer, vol. 7(3), pages 237-255, July.
    2. Peter Stockman, 2001. "The real dollar-yen exchange rate, asymmetries in trade flows and the current account in a perfect-foresight model for developing East Asia," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 9(1), pages 19-36.

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