Tariffs, Time Preference, and the Current Account under Weakly Nonseparable Preferences

Shinsuke Ikeda

Review of International Economics, 2003, vol. 11, issue 1, 101-113

Abstract: Incorporating weakly nonseparable preferences into the familiar time–preference model, the author emphasizes a role of steady–state welfare changes in determining the effect of permanent tariffs on the current account. The effect consists of a welfare effect, due to steady–state welfare changes, which is negative (positive) when preferences toward imports are more (less) wealth–enhanced than toward exports; and a substitution effect, which occurs only with initial distortion. Even without initial distortion, a marginal tariff has a first–order welfare effect on the current account. Its sign does not depend on whether impatience is increasing or decreasing in wealth.

Date: 2003
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https://doi.org/10.1111/1467-9396.00371

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Working Paper: Tariffs, Time Preference, and the Current Account under Weakly Nonseparable Preferences (2000)
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