Abstract: This paper deals with an equilibrium of tariff policies among countries when retaliation does take place. A country may improve its position as compared with the free trade by imposing a tariff on imports. This should be at the expense of some other countries, and those that are left worseoff will retaliate by countervailing tariffs. The warfare will continue until no country finds it advantageous to alter its own tariff policy. The problem of tariff warfare and policy equilibrium has so far been analyzed by Scitovsky (194 l-2), Johnson (1953-4), Gorman (1958), and Honvell (1966) in simple settings of two-country, two-commodity models. The present work is an extension along their line to a manycountry, many-commodity case. The brief outline of our argument may be described as follows. We are concerned with a model of world economy in which different commodity-prices prevail among different countries and each country executes import tariff policies that are country-wise and commodity-wise discriminative. Each country is supposed to have a set of alternative tariff po. licies and a social choice function according to which its economic position is evaluated. In each country, the tariff revenue is assumed to be refunded to the private sector in a lump-sum fashion. For a fixed world tariff structure in which each pursues accrtain policy, a world equilibrium is established in the sense that the demand fo,: and supply of each commodity is balanced in the world market. Each country then enjoys a welfare level prescribed by the social choice function. For different ta.riff structures, we obtain different world equilibria, and different welfare levels for each country.
Publication Year: 1973
Publication Date: 1973-11-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 45
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