Optimum Tariffs and Retaliation: How Country Numbers Matter

Benjamin Zissimos

No 904, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics

Abstract: This paper identifies a new terms-of-trade externality that is exercised through tariff setting. A North-South model of international trade is introduced in which the number of countries in each region can be varied. As the number of countries in one region is increased, each government there competes more aggressively with the others in its region, by lowering its tariff, to attract imports from the other region. In doing so, all countries in a region exert a negative terms-of-trade externality on each other, collectively undermining their own terms of trade and welfare. This externality can increase efficiency if the numbers of countries in both regions are increased simultaneously.

Keywords: Comparative statics; efficiency; North-South; tariff war; terms of trade (search for similar items in EconPapers)
JEL-codes: C72 F02 F13 (search for similar items in EconPapers)
Date: 2009-03
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (7)

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http://www.accessecon.com/pubs/VUECON/vu09-w04.pdf First version, 2009 (application/pdf)

Related works:
Journal Article: Optimum tariffs and retaliation: How country numbers matter (2009)
Working Paper: Optimum Tariffs and Retaliation: How Country Numbers Matter (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:van:wpaper:0904

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