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Growth, expectations and tariffs
Author(s) -
Honkapohja Seppo,
TurunenRed Arja H.,
Woodland Alan D.
Publication year - 2016
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12240
Subject(s) - economics , profitability index , limiting , rest (music) , investment (military) , growth model , international economics , capital good , learning by doing , capital (architecture) , monetary economics , microeconomics , production (economics) , public good , mechanical engineering , medicine , cardiology , archaeology , finance , politics , political science , law , engineering , history
Abstract We present a growth model of international trade in which expectations about profitability and growth influence innovation and investment. Adaptive learning dynamics determine transition paths for countries with differing structural parameters. Countries limiting trade by tariffs on imports of capital goods can experience gains in growth and perceived utility for a finite time, whereas the rest of the world is adversely affected. Asymmetric gains persist longer when structural advantages of the country applying tariffs are larger. Substantial differences in levels of innovation, output and utility can appear within our asymmetric country setting.