Optimal Tariffs with Inframarginal Exporters

Rishi Sharma

No 2016-04, Working Papers from Department of Economics, Colgate University

Abstract: This paper shows that the presence of inframarginal exporters can itself be a reason for a positive optimal tariff. To demonstrate this, I develop a new model of international trade that incorporates fixed costs of exporting and firm heterogeneity within a perfectly competitive framework. In this setting, despite the fact that there are no pre-existing distortions, even a small importing country with no world market power has an incentive to optimally impose a tariff. In the limit, as either firm heterogeneity or the fixed costs of exporting vanish – so that there are no inframarginal firms – the optimal tariff approaches zero. The importing country is able to benefit from a tariff because part of the burden falls on the exporter rents earned by foreign inframarginal firms.

Keywords: optimal tariff; inframarginal firms; firm heterogeneity; exporter rents (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Date: 2016-11-01, Revised 2016-11-21
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://digitalcollections.colgate.edu/islandora/object/islandora%253A4729 (application/pdf)

Related works:
Journal Article: Optimal tariffs with inframarginal exporters (2018)
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:cgt:wpaper:2016-04

Access Statistics for this paper

More papers in Working Papers from Department of Economics, Colgate University Contact information at EDIRC.
Bibliographic data for series maintained by Chad Sparber ().