The (Non) Equivalence of Tariff and Quota Policy in the Presence of Search Costs

Mark Herander ()
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Mark Herander: Department of Economics, University of South Florida

No 1113, Working Papers from University of South Florida, Department of Economics

Abstract: This study compares the economic effects of tariffs and quotas in an environment where exporters must expend resources to find foreign consumers. Within a sequential search model, we find the policies to be (with rare exceptions) nonequivalent in domestic price. The relative impact of the two policies on domestic prices depends crucially on the magnitude of the two policies with prices more likely to be higher under tariff policy at lower tariff rates. The study adds to the �equivalence� literature by identifying another, and empirically relevant, factor which would result in the breakdown of equivalence between tariff and quota policy.

Keywords: Search; tariffs; quotas (search for similar items in EconPapers)
JEL-codes: F12 F13 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2013-03
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Persistent link: https://EconPapers.repec.org/RePEc:usf:wpaper:1113

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