Tariff Wars and Trade Deals With Costly Government

John B. Burbridge () and Gordon M. Myers ()
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John B. Burbridge: McMaster University, http://socserv2.socsci.mcmaster.ca/~econ
Gordon M. Myers: Simon Fraser University, http://www.sfu.ca/~gmmyers

Discussion Papers from Department of Economics, Simon Fraser University

Abstract: We study a simple model of tariff wars and trade deals in which government revenue collection and disbursement uses resources. The introduction of a costly government leads to lower non-cooperative tariffs, the possibility that a less costly government may win a tariff war, and fully cooperative trade deals where countries lower tariffs but do not eliminate them, even with lump-sum taxes and transfers.

Date: 2000, Revised 2000-06-08

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