Optimal Tariffs when the Trade Elasticity Varies

Tomohiro Ara

No 8, TUPD Discussion Papers from Graduate School of Economics and Management, Tohoku University

Abstract: We show that the variable nature of the trade elasticity provides new policy implications of optimal tariffs. Conditional on the two sufficient statistics for welfare, the optimal level of import tariffs is the same across different trade models with a constant trade elasticity, but more generally it depends on the micro structure that makes the trade elasticity variable. Using analytical solutions of comparative statics with respect to trade liberalization and country size, we also quantitatively compare the difference in bilateral and unilateral impacts of these competitive pressures on optimal tariffs with a variable trade elasticity.

Pages: 53 pages
Date: 2021-10-29
New Economics Papers: this item is included in nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:toh:tupdaa:8

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