Tariff wars, unemployment, and top incomes

Elias Dinopoulos, Gunnar Heins and Bulent Unel

Journal of Monetary Economics, 2024, vol. 148, issue C

Abstract: Motivated by the 2018–19 global tariff war, we develop a multi-country trade model with occupational choice, heterogeneous firms, and unemployment. The model features a complete tariff pass-through and positive optimal tariffs addressing product and labor-market distortions. The quantitative analysis of the model with four countries/regions shows that raising tariffs unilaterally by a country increases welfare but also raises unemployment and top incomes in that country, whereas having the opposite impact on tariff-targeted countries. A global tariff war reduces every country’s welfare, unemployment, and top-income inequality, whereas moving from a worldwide tariff war to free trade raises every country’s welfare, unemployment, and top-income inequality.

Keywords: Tariff wars; Optimal tariffs; Nash tariffs; Occupational choice; Entrepreneurs; Top incomes; Directed search; Unemployment; Welfare (search for similar items in EconPapers)
JEL-codes: F13 F14 J2 J3 J6 L1 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393224000692
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:148:y:2024:i:c:s0304393224000692

DOI: 10.1016/j.jmoneco.2024.103616

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().