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The Growth and Welfare Consequences of Differential Tariffs

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  • Brock, Philip L
  • Turnovsky, Stephen J

Abstract

This paper analyzes the impact of differential tariffs on consumption and investment in a specific factors model of a small open economy in which capital is accumulated over time. Particular attention is devoted to the welfare aspects, highlighting the cost of the intertemporal distortions produced by protective trade policies. Several specific welfare propositions are obtained. First, tariff protection is shown to create short-run benefits but long-run costs in welfare. Second, the second-best policy for the two tariffs is characterized. Finally, several propositions summarizing the implications of the authors' analysis for tariff reform are derived. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Brock, Philip L & Turnovsky, Stephen J, 1993. "The Growth and Welfare Consequences of Differential Tariffs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(4), pages 765-794, November.
    • Handle: RePEc:ier:iecrev:v:34:y:1993:i:4:p:765-94
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    Citations

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    Cited by:

    1. Petrucci, Alberto, 2006. "Wealth Accumulation and Growth in a Specific-Factors Model of Trade and Finance," Economics & Statistics Discussion Papers esdp06029, University of Molise, Department of Economics.
    2. Chung-Fu Lai, 2016. "Tariff, Consumption Home Bias and Macroeconomic Dynamics," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 6(8), pages 425-444, August.
    3. Osang, Thomas & Pereira, Alfredo, 1996. "Import tariffs and growth in a small open economy," Journal of Public Economics, Elsevier, vol. 60(1), pages 45-71, April.
    4. Partha Sen & Koji Shimomura, 2017. "Convergence and Overtaking in a Dynamic two Country Model," Open Economies Review, Springer, vol. 28(1), pages 107-124, February.
    5. Guillo, Maria Dolores & Perez-Sebastian, Fidel, 2007. "The curse and blessing of fixed specific factors in small-open economies," Journal of Development Economics, Elsevier, vol. 82(1), pages 58-78, January.
    6. Yano, Makoto & Honryo, Takakazu, 2010. "Trade imbalances and harmonization of competition policies," Journal of Mathematical Economics, Elsevier, vol. 46(4), pages 438-452, July.
    7. Jenny Ligthart & Gerard C. van der Meijdenz, 2011. "The Dynamics of Revenue-Neutral Trade Liberalization," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1124, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    8. Bye, Brita, 2002. "Taxation, Unemployment, and Growth: Dynamic Welfare Effects of "Green" Policies," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 1-19, January.
    9. Jenny Ligthart & Gerard C. van der Meijden, 2010. "Coordinated Tax-Tariff Reforms, Informality, and Welfare Distribution," CESifo Working Paper Series 3107, CESifo.
    10. Hwang, Yu-Ning & Turnovsky, Stephen J., 2013. "Exchange rate pass-through and the effects of tariffs on economic performance and welfare," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 81-102.
    11. Osang, Thomas & Turnovsky, Stephen J., 2000. "Differential tariffs, growth, and welfare in a small open economy," Journal of Development Economics, Elsevier, vol. 62(2), pages 315-342, August.
    12. Willenbockel, Dirk, 1999. "Dynamic applied general equilibrium trade policy analysis in the presence of foreign asset cross-ownership," Economic Modelling, Elsevier, vol. 16(3), pages 371-388, August.
    13. Stephen J. Turnovsky & Zinan Wang, 2022. "The Effects of Globalization on Skilled Labor, Unskilled Labor, and the Skill Premium," Open Economies Review, Springer, vol. 33(3), pages 407-452, July.
    14. Fender, John & Yip, Chong K., 2000. "Tariffs and exchange rate dynamics redux," Journal of International Money and Finance, Elsevier, vol. 19(5), pages 633-655, October.
    15. Kazuhiro YUKI, 2007. "Determinants Of Sectoral Composition In A Small Open Economy: Theoretical And Quantitative Investigations Of The Philippines," The Developing Economies, Institute of Developing Economies, vol. 45(4), pages 391-436, December.
    16. Dinopoulos, Elias & Segerstrom, Paul, 1999. "The dynamic effects of contingent tariffs," Journal of International Economics, Elsevier, vol. 47(1), pages 191-222, February.
    17. Turnovsky, Stephen J. & Rojas-Vallejos, Jorge, 2018. "The distributional consequences of trade liberalization: Consumption tariff versus investment tariff reduction," Journal of Development Economics, Elsevier, vol. 134(C), pages 392-415.
    18. Turnovsky, Stephen J., 1996. "Fiscal policy, growth, and macroeconomic performance in a small open economy," Journal of International Economics, Elsevier, vol. 40(1-2), pages 41-66, February.
    19. Dinopoulos, Elias & Syropoulos, Constantinos, 1997. "Tariffs and Schumpeterian growth," Journal of International Economics, Elsevier, vol. 42(3-4), pages 425-452, May.

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