Tariffs Flashcards
Economic theory of tariffs
DWL Theory of second best Optimum tariff MA effects effective prot rates
Theory of second-best
If there exists some distortion in the economy preventing a perfectly competitive eqm it will not be optimal for the remaining sectors to attain the perfectly competitive equilibrium
Applied to international trade theory if some countries protect home markets it will not be in the interest of the world economy for the others to pursue unilateral free trade strategies
Optimum tariff
Opposing forces
1 Terms of trade affect. Lowers the demand of foreign goods resulting in a fall in the price of imports
2 Fall in volume of inputs distorts consumption behaviour
Optimal is benefit outweighs the harms
Import substitution
Tariff made domestic products more competitive. newly protected sector improved following the introduction of the tariff
Macro economic performance: The large for a manufacturing imports generated favourable effects on macroeconomic performance by helping to reduce the import propensity of the economy
Income affect(negative
Increasing income also increases the imports through the Y component in NX
Mundell model
Conflict between tariff and devaluation
Institutional and psychological effects, def of accélérateur
Investment determined by the change in output or consumption
Non linearity arises if I driven by expectation changes
No general tariff is the permanent guarantees to domestic producers by instituting IdAC with delegates pwrs to monitor changes in compe and raise t levels in the national interest
Economic effects of tariffs short run
Economies of scale link to the size of UK market
Economic affects of t lr
Recardons and complacency
ReInvest
S and K newly and not newly
What years
L?
Output
1924 30 35
Newly output growth -0.1 to 3.8
Not newly 2.7 to 2.3
+2.28
