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The dynamic and distributional aspects of import tariffs

Listed author(s):
  • Lechthaler, Wolfgang
  • Mileva, Mariya

We use a dynamic trade model with two sectors and two types of workers to analyze the optimal setting of income-generating tariffs. This approach allows us to take account of adjustment dynamics, distributional aspects and the time horizon of policy makers and workers. In response to a unilateral increase in tariffs aggregate consumption increases only sluggishly so that policy makers with a short time horizon tend to set lower tariffs. Workers' preferences for tariffs depend on the sector where they are employed as well as their skill class, with the relative weight of both aspects determined by the time horizon of the workers. Unskilled workers in the unskilledintensive sector are the ones most in favor of protectionism and might even benefit from a trade war.

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File URL: https://www.econstor.eu/bitstream/10419/161633/1/888675038.pdf
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Paper provided by Kiel Institute for the World Economy (IfW) in its series Kiel Working Papers with number 2082.

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Date of creation: 2017
Handle: RePEc:zbw:ifwkwp:2082
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  1. Alessandria, George & Choi, Horag, 2014. "Establishment heterogeneity, exporter dynamics, and the effects of trade liberalization," Journal of International Economics, Elsevier, vol. 94(2), pages 207-223.
  2. Wacziarg, Romain & Wallack, Jessica Seddon, 2004. "Trade liberalization and intersectoral labor movements," Journal of International Economics, Elsevier, vol. 64(2), pages 411-439, December.
  3. Cacciatore, Matteo, 2014. "International trade and macroeconomic dynamics with labor market frictions," Journal of International Economics, Elsevier, vol. 93(1), pages 17-30.
  4. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
  5. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  6. Beaulieu, Eugene, 2002. "The Stolper-Samuelson Theorem Faces Congress," Review of International Economics, Wiley Blackwell, vol. 10(2), pages 343-360, May.
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