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The Protective Effect of a Tariff Under Uncertainty

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  • Elhanan Helpman
  • Assaf Razin

Abstract

We examine the protective effect of a tariff in a small economy with uncertainty and a stock market in which shares of firms are traded. In a deterministic economy, the allocation of resources is governed by commodity prices; in our economy, it is governed by equity prices and is dependent on commodity prices only to the extent that they influence equity prices. We show that in the absence of international trade in securities a tariff need not protect the import competing sector. In the presence of international trade in securities, a tariff always protects the import competing sector.
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Suggested Citation

  • Elhanan Helpman & Assaf Razin, 1978. "The Protective Effect of a Tariff Under Uncertainty," Discussion Papers 312, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Handle: RePEc:nwu:cmsems:312
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    1. Elhanan Helpman & Assaf Razin, 1978. "Uncertainty and International Trade in the Presence of Stock Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 45(2), pages 239-250.
    2. Elhanan Helpman & Assaf Razin, 1978. "Welfare Aspects of International Trade in Goods and Securities," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 92(3), pages 489-508.
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    Cited by:

    1. Coyle, Barry & Chambers, Robert G. & Schmitz, Andrew, 1986. "Economic Gains from Agricultural Trade: A Review and Bibliography," Miscellaneous Publications 319990, United States Department of Agriculture, Economic Research Service.
    2. Sébastien Pouliot & Bruno Larue, 2012. "Import sensitive products and perverse tariff-rate quota liberalization," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 903-924, August.
    3. Faia, Ester, 2002. "Monetary policy in a world with different financial systems," Working Paper Series 183, European Central Bank.

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