The Effect Of Temporary Import Protection On Future Prices

Thomas J. Holmes

No 292696, SSRI Workshop Series from University of Wisconsin-Madison, Social Systems Research Institute

Abstract: This paper determines the effect of a temporary tariff or import quota on future prices. It assumes that the home country consumes a large portion of world output so that the tariff influences world prices. The temporary tariff affects current investment decisions and this is the channel through which the tariff influences future world prices. The tariff has offsetting effects on future prices because it expands future domestic supply and contracts future foreign supply. For a benchmark case it is shown that the net effect on future prices is positive, i.e., the temporary tariff increases domestic prices even after the tariff measure has expired.

Keywords: Research; Methods/Statistical; Methods (search for similar items in EconPapers)
Pages: 24
Date: 1993-05
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwssri:292696

DOI: 10.22004/ag.econ.292696

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