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Tariffs and Welfare in an Imperfectly Competitive Overlapping‐Generations Model
Author(s) -
Sen Partha
Publication year - 2001
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/1467-9361.00120
Subject(s) - economics , tariff , welfare , homogeneous , small open economy , consumption (sociology) , boom , intermediate good , current account , open economy , monetary economics , microeconomics , international economics , macroeconomics , production (economics) , market economy , monetary policy , thermodynamics , social science , physics , environmental engineering , sociology , exchange rate , engineering
The effect of a tariff is analyzed in a two‐sector model in an uncertain‐lifetimes framework. One of the sectors is monopolistically competitive. It is shown that while a tariff leads to a consumption boom and possibly a current‐account surplus, its welfare effects depend on whether the homogeneous good or the differentiated good is exported by the small open economy. Welfare improves if the differentiated good is nontraded but deteriorates if the homogeneous good is nontraded.