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The (Non) Equivalence of Tariff and Quota Policy in the Presence of Search Costs

Author

Listed:
  • Mark Herander

    (Department of Economics, University of South Florida)

Abstract

This study compares the economic effects of tariffs and quotas in an environment where exporters must expend resources to find foreign consumers. Within a sequential search model, we find the policies to be (with rare exceptions) nonequivalent in domestic price. The relative impact of the two policies on domestic prices depends crucially on the magnitude of the two policies with prices more likely to be higher under tariff policy at lower tariff rates. The study adds to the �equivalence� literature by identifying another, and empirically relevant, factor which would result in the breakdown of equivalence between tariff and quota policy.

Suggested Citation

  • Mark Herander, 2013. "The (Non) Equivalence of Tariff and Quota Policy in the Presence of Search Costs," Working Papers 1113, University of South Florida, Department of Economics.
    • Handle: RePEc:usf:wpaper:1113
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    File URL: https://www.usf.edu/arts-sciences/departments/economics/documents/HeranderEquivalenceofTariff.pdf
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    More about this item

    Keywords

    Search; tariffs; quotas;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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