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Optimal Tariff Policy on Imports from Multinationals *
Author(s) -
SVEDBERG PETER
Publication year - 1979
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.1979.tb02203.x
Subject(s) - tariff , monopolistic competition , multinational corporation , production (economics) , welfare , economics , switchover , international economics , partial equilibrium , business , international trade , general equilibrium theory , microeconomics , monopoly , market economy , finance , electrical engineering , engineering
Using partial equilibrium analysis, it is shown that for small countries there is an optimal tariff on imports from a monopolistic multinational. There is also (under specified circumstances) a tariff at which the multinational finds subsidiary production more profitable than exports: the switchover tariff. The interaction between the optimal and switchover tariffs is analyzed from the small country's welfare standpoint. The conclusion is that there is not one, but a variety of possible optimal policies for the country: trade at the optimal tariff, with or without prohibition of subsidiary production, or tariff‐protected subsidiary production.