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Optimum Tariffs and Retaliation: How Country Numbers Matter

  • Francis Bloch

    (GREQAM and Ecole Superieure de Mecanique de Marseille)

  • Ben Zissimos

    ()

    (Department of Economics, Vanderbilt University)

This paper presents a North-South model of international trade in which (i) there is a relatively small number of countries in the North and (ii) the North is relatively abundant in capital while the South is relatively abundant in labor. Using new methods in monotone comparative statics, the effect of changes in country numbers on the outcome of a "tariff war" is studied. It is shown that terms-of-trade and welfare in the North are greater the larger the number of countries in the South and vice versa. The paper also studies the relationship between the number of countries in the world market and its performance in terms of efficiency. It is shown that, as the world economy is replicated, the equilibrium in a tariff war converges monotonically towards the competitive equilibrium of free trade.

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File URL: http://www.accessecon.com/pubs/VUECON/vu08-w02.pdf
File Function: First version, 2008
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Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0802.

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Date of creation: Jan 2008
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Handle: RePEc:van:wpaper:0802
Contact details of provider: Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

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  10. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
  11. Gros, Daniel, 1987. "A note on the optimal tariff, retaliation and the welfare loss from tariff wars in a framework with intra-industry trade," Journal of International Economics, Elsevier, vol. 23(3-4), pages 357-367, November.
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  13. Corden, W.M., 1984. "The normative theory of international trade," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 2, pages 63-130 Elsevier.
  14. Zissimos, Ben, 2009. "Optimum tariffs and retaliation: How country numbers matter," Journal of International Economics, Elsevier, vol. 78(2), pages 276-286, July.
  15. Baldwin, Richard, 1987. "Politically realistic objective functions and trade policy PROFs and tariffs," Economics Letters, Elsevier, vol. 24(3), pages 287-290.
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  18. Giovanni Maggi & Pinelopi Koujianou Goldberg, 1999. "Protection for Sale: An Empirical Investigation," American Economic Review, American Economic Association, vol. 89(5), pages 1135-1155, December.
  19. Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, vol. 60(1), pages 57-76, January.
  20. Bagwell,K. & Staiger,R.W., 1998. "An economic theory of GATT," Working papers 15, Wisconsin Madison - Social Systems.
  21. James E. Anderson & J. Peter Neary, 2005. "Measuring the Restrictiveness of International Trade Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012200, June.
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  23. John Kennan & Raymond Riezman, 2013. "Do Big Countries Win Tariff Wars?," World Scientific Book Chapters, in: International Trade Agreements and Political Economy, chapter 4, pages 45-51 World Scientific Publishing Co. Pte. Ltd..
  24. Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2006. "Estimating trade restrictiveness indices," Policy Research Working Paper Series 3840, The World Bank.
  25. Chad P. Bown & Meredith Crowley, 2004. "Policy externalities: how U.S. antidumping affects Japanese exports to the EU," Working Paper Series WP-04-12, Federal Reserve Bank of Chicago.
  26. Otani, Yoshihiko, 1980. "Strategic Equilibrium of Tariffs and General Equilibrium," Econometrica, Econometric Society, vol. 48(3), pages 643-62, April.
  27. John Whalley, 1984. "Trade Liberalization among Major World Trading Areas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262231204, June.
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