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A dynamic model for an optimal specific import tariff

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  • Nasreen Nawaz

Abstract

The existing literature on optimal specific import tariff only compares the pre- and the post-tariff market equilibriums to account for the efficiency losses. However, when the government imposes a tariff, it affects the import quantity, hence pushing the market out of equilibrium. The supply and the demand of the commodity on which a tariff is imposed then adjust over time to bring the new equilibrium. This article develops a dynamic model and derives an optimal specific import tariff path minimizing the efficiency losses during the adjustment process as well as the post-tariff equilibrium subject to a tariff revenue constraint.

Suggested Citation

  • Nasreen Nawaz, 2019. "A dynamic model for an optimal specific import tariff," The International Trade Journal, Taylor & Francis Journals, vol. 33(3), pages 255-276, May.
    • Handle: RePEc:taf:uitjxx:v:33:y:2019:i:3:p:255-276
    DOI: 10.1080/08853908.2018.1544102
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    4. Felbermayr, Gabriel & Jung, Benjamin & Larch, Mario, 2013. "Optimal tariffs, retaliation, and the welfare loss from tariff wars in the Melitz model," Journal of International Economics, Elsevier, vol. 89(1), pages 13-25.
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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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