Domestic Distortions and the Theory of Tariffs

Michihiro Ohyama
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Michihiro Ohyama: Keio University

Chapter Chapter 5 in Macroeconomics, Trade, and Social Welfare, 2016, pp 93-107 from Springer

Abstract: Abstract The theory of tariffs, which evolved from the classical controversy over free trade and protectionism, occupies an important position in the study of trade and welfare. Early in the present century Bickerdike (1906, 1907a, b) formalized the proposition that a country is able to increase its real income by imposing a tariff on imports. The theme, labeled by Edgeworth (1908) as “poison,” was later revived by Kaldor (1940) and thus achieved general recognition in the literature. Known today as the optimal tariff argument, it postulates fully competitive conditions, and relies crucially upon the assumption that the tariff-imposing country is potentially capable of affecting the international prices by restricting the volume of trade. In the absence of such national monopoly power, however, the argument ends up in endorsing the doctrine of free trade as the best policy for the country.

Keywords: Home Country; Free Trade; Relative Price; Real Income; Domestic Price (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/978-4-431-55807-1_5

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