Protecting Consumers through Protection: The Role of Tariff-Induced Technology Transfer

Tarun Kabiraj () and Sugata Marjit

No 98-088/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We consider a duopolistic trade model where a tariff induces "more efficient" foreign firm to transfer its technology to the "less efficient" domestic firm. Contrary to the conventional wisdom, such a tariff raises consumers' surplus relative to the free-trade situation. Later under linear demand assumption we completely characterize the optimal tariff in this context. Possibility of technology transfer reduces the optimal tariff rate relative to the usual level.

Keywords: technology transfer; tariff protection; consumer surplus; foreign direct investment (search for similar items in EconPapers)
JEL-codes: D43 F13 L13 (search for similar items in EconPapers)
Date: 1998-08-27
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Journal Article: Protecting consumers through protection: The role of tariff-induced technology transfer (2003)
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Persistent link: http://EconPapers.repec.org/RePEc:dgr:uvatin:19980088

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