The Protective Effect of a Tariff Under Uncertainty

Assaf Razin and Elhanan Helpman

Scholarly Articles from Harvard University Department of Economics

Abstract: We examine the protective effect of a tariff in a small economy with uncertainty and a stock market in which shares of firms are traded. In a deterministic economy, the allocation of resources is governed by commodity prices; in our economy, it is governed by equity prices and is dependent on commodity prices only to the extent that they influence equity prices. We show that in the absence of international trade in securities a tariff need not protect the import competing sector. In the presence of international trade in securities, a tariff always protects the import competing sector.

Date: 1978
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Published in Journal of Political Economy -Chicago-

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Journal Article: The Protective Effect of a Tariff under Uncertainty (1978)
Working Paper: The Protective Effect of a Tariff Under Uncertainty (1978)
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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:3445093

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