Tariff Policy with Intracountry Firm Mobility: A Spatial Analysis

Mark G. Herander

Canadian Journal of Economics, 1997, vol. 30, issue 2, 413-28

Abstract: Previous studies of trade policy in a spatial setting assume the production site of firms to be fixed. In contrast, this paper examines the impact of an import tariff on a component good when a monopoly final good producer is free to locate anywhere in the domestic market. A component tariff that induces the monopolist to move away from the foreign border reinforces the protectionist effects of the tariff with fixed location. At the same time, the tariff-induced relocation may increase domestic welfare whereas with fixed location welfare always falls.

Date: 1997
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