The Effects of Tariffs and Real Wages on Employment in a Barro-Grossman Model of an Open Economy

Per-Olov Johansson and Karl-Gustaf Löfgren
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Per-Olov Johansson: University of Umeå and the Royal College of Forestry
Karl-Gustaf Löfgren: University of Umeå and the Royal College of Forestry

A chapter in Unemployment, 1981, pp 39-55 from Palgrave Macmillan

Abstract: Abstract This paper deals with the effects of tariffs, changes in real wages, and devaluations on employment in a disequilibrium model of a small open economy. It is e.g. shown that the impacts of tariffs under a flexible exchange rate regime are insensi tive to the kind of disequilibrium which prevails. The introduction of tariffs will decrease total employment. Analogous problems are analyzed under a fixed exchange rate regime. We show that the introduction of tariffs is now a better remedy against unemployment. We also indicate how changes in real wages and devaluations can be used to cure short-run unemployment.

Keywords: Exchange Rate; Real Wage; Exchange Rate Regime; Small Open Economy; Tariff Rate (search for similar items in EconPapers)
Date: 1981
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-05966-9_4

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DOI: 10.1007/978-1-349-05966-9_4

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