The Optimal Tariff, Production Lags and Time Consistency

Harvey Lapan

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: The optimal tariff for a large country equals the reciprocal of the foreign export elasticity of supply. However, if prod uction decisions occur before consumption decisions, the ex ante opti mal tariff is not time consistent because the ex post elasticity is l ess than the ex ante elasticity. The author shows all countries are w orse off if the large country cannot precommit to its ex ante optimal tariff, and that all countries can gain if the large country taxes d omestic production of importables.

Date: 1988-06-01
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Published in American Economic Review, June 1988, vol. 78 no. 3, pp. 395-340

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Journal Article: The Optimal Tariff, Production Lags, and Time Consistency (1988)
Working Paper: The Optimal Tariff, Production Lags, and Time Consistency (1988)
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