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Tariff Reforms with Rigid Wages

  • Rod Falvey
  • Udo Kreickemeier

This paper analyses the effects of tariff reforms on welfare and market access in a competitive small open economy that is characterised by involuntary unemployment due to non-market clearing wages that are fixed either in terms of the numeraire or in real terms. We show that recent tariff-reform results can be extended to integrated reforms of tariffs and the wage rate, and that the inherent tension between reforms that increase welfare and market access carry over. We also derive welfare increasing tariff-reform strategies that keep the wage rate constant, and show that this tension may be attenuated.

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File URL: http://www.nottingham.ac.uk/gep/documents/papers/2007/07-29.pdf
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Paper provided by University of Nottingham, GEP in its series Discussion Papers with number 07/29.

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Handle: RePEc:not:notgep:07/29
Contact details of provider: Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
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Web page: http://www.nottingham.ac.uk/gep/index.aspx

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  1. Neary, J Peter, 1995. "Trade Liberalisation and Shadow Prices in the Presence of Tariffs and Quotas," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 531-54, August.
  2. Udo Kreickemeier, 2005. "Unemployment and the welfare effects of trade policy," Canadian Journal of Economics, Canadian Economics Association, vol. 38(1), pages 194-210, February.
  3. Ju, Jiandong & Krishna, Kala, 2000. "Welfare and market access effects of piecemeal tariff reform," Journal of International Economics, Elsevier, vol. 51(2), pages 305-316, August.
  4. James E Anderson & J Peter Neary, 2004. "Welfare versus Market Access - The Implications of Tariff Structure for Tariff Reform," Working Papers 200423, School of Economics, University College Dublin.
  5. Hatta, Tatsuo, 1977. "A Recommendation for a Better Tariff Structure," Econometrica, Econometric Society, vol. 45(8), pages 1859-69, November.
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