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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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    File URL: http://www.kellogg.northwestern.edu/research/math/papers/312.pdf
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    1. Elhanan Helpman & Assaf Razin, 1978. "Uncertainty and International Trade in the Presence of Stock Markets," Review of Economic Studies, Oxford University Press, vol. 45(2), pages 239-250.
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    Cited by:

    1. Faia, Ester, 2002. "Monetary policy in a world with different financial systems," Working Paper Series 0183, European Central Bank.

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