Tariffs, quotas and VER's when capital is internationally mobile

J. Peter Neary

No 198747, Working Papers from School of Economics, University College Dublin

Abstract: This paper begins by reexamining the equivalence of tariffs and quantitative trade restrictions. It is argued that equivalence holds in extremely general circumstances but that this fact must be interpreted with care, since the tariff rates equivalent to a given set of quantitative restrictions are themselves functions of all the exogenous variables characterising equilibrium. A general framework for comparing the effects of tariffs, quotas and VER's is then presented. Among the results, it is shown that, although international capital mobility raises the welfare cost of tariff protection, it lowers the welfare cost of protection by means of quantitative restrications.

Keywords: Tariff; Restraint of trade; Export controls (search for similar items in EconPapers)
Date: 1987-03
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