TY - JOUR
T1 - A larger country sets a lower optimal tariff
AU - Naito, Takumi
N1 - Funding Information:
Funding information I acknowledge Japan Society for the Promotion of Science (#25380336) and Research Institute of Economy, Trade and Industry for financial support I am grateful to the associate editor Raymond Riezman, two anonymous reviewers, and seminar participants at Kagawa University, Economic Theory and Policy Workshop, and Research Institute of Economy, Trade and Industry for their helpful comments. I also appreciate Japan Society for the Promotion of Science (#25380336) and RIETI for financial support. All remaining errors are mine.
Funding Information:
I acknowledge Japan Society for the Promotion of Science (#25380336) and Research Institute of Economy, Trade and Industry for financial support
Funding Information:
I am grateful to the associate editor Raymond Riezman, two anonymous reviewers, and seminar participants at Kagawa University, Economic Theory and Policy Workshop, and Research Institute of Economy, Trade and Industry for their helpful comments. I also appreciate Japan Society for the Promotion of Science (#25380336) and RIETI for financial support. All remaining errors are mine.
Publisher Copyright:
© 2019 The Authors Review of International Economics Published by John Wiley & Sons Ltd
PY - 2019/5
Y1 - 2019/5
N2 - We develop a new optimal tariff theory that is consistent with the fact that a larger country sets a lower tariff. In our dynamic Dornbusch–Fischer–Samuelson Ricardian model, the long-run welfare effects of a rise in a country’s tariff consist of the direct revenue, indirect revenue, and growth effects. Based on this welfare decomposition, we obtain two main results. First, the optimal tariff of a country is positive. Second, the optimal tariff of a country is likely to be decreasing in its absolute advantage parameter, implying that a larger (i.e., more technologically advanced) country sets a lower optimal tariff.
AB - We develop a new optimal tariff theory that is consistent with the fact that a larger country sets a lower tariff. In our dynamic Dornbusch–Fischer–Samuelson Ricardian model, the long-run welfare effects of a rise in a country’s tariff consist of the direct revenue, indirect revenue, and growth effects. Based on this welfare decomposition, we obtain two main results. First, the optimal tariff of a country is positive. Second, the optimal tariff of a country is likely to be decreasing in its absolute advantage parameter, implying that a larger (i.e., more technologically advanced) country sets a lower optimal tariff.
UR - http://www.scopus.com/inward/record.url?scp=85061046664&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85061046664&partnerID=8YFLogxK
U2 - 10.1111/roie.12391
DO - 10.1111/roie.12391
M3 - Article
AN - SCOPUS:85061046664
SN - 0965-7576
VL - 27
SP - 643
EP - 665
JO - Review of International Economics
JF - Review of International Economics
IS - 2
ER -