A dynamic model for an optimal specific import tariff

Nasreen Nawaz

The International Trade Journal, 2019, vol. 33, issue 3, 255-276

Abstract: The existing literature on optimal specific import tariff only compares the pre- and the post-tariff market equilibriums to account for the efficiency losses. However, when the government imposes a tariff, it affects the import quantity, hence pushing the market out of equilibrium. The supply and the demand of the commodity on which a tariff is imposed then adjust over time to bring the new equilibrium. This article develops a dynamic model and derives an optimal specific import tariff path minimizing the efficiency losses during the adjustment process as well as the post-tariff equilibrium subject to a tariff revenue constraint.

Date: 2019
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DOI: 10.1080/08853908.2018.1544102

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