Tariffs in a Ricardian Model with a Monopolistically Competitive Sector: the Role of Nontradables

Partha Sen

Review of International Economics, 2005, vol. 13, issue 4, 676-681

Abstract: It is shown that for a small open economy the welfare effects of a tariff on the import of the brands of a differentiated good depends crucially on the pattern of trade. The literature has shown that welfare rises when the domestic brands are nontraded. But when the domestic brands are traded, the imposition of a tariff lowers welfare by shifting demand towards the nontraded homogeneous good which causes exit from the differentiated goods industry.

Date: 2005
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