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Tariffs in a Ricardian Model with a Monopolistically Competitive Sector: the Role of Nontradables
Author(s) -
Sen Partha
Publication year - 2005
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2005.00530.x
Subject(s) - economics , tariff , homogeneous , welfare , small open economy , monetary economics , international economics , intermediate good , open economy , macroeconomics , market economy , production (economics) , exchange rate , thermodynamics , physics
It is shown that for a small open economy the welfare effects of a tariff on the import of the brands of a differentiated good depends crucially on the pattern of trade. The literature has shown that welfare rises when the domestic brands are nontraded. But when the domestic brands are traded, the imposition of a tariff lowers welfare by shifting demand towards the nontraded homogeneous good which causes exit from the differentiated goods industry.