Titlebar

Export bibliographic data
Literature by the same author
plus on the publication server
plus at Google Scholar

 

Optimal Tariffs, Retaliation, and the Welfare Loss from Tariff Wars in the Melitz Model

Title data

Felbermayr, Gabriel ; Jung, Benjamin ; Larch, Mario:
Optimal Tariffs, Retaliation, and the Welfare Loss from Tariff Wars in the Melitz Model.
In: Journal of International Economics. Vol. 89 (January 2013) Issue 1 . - pp. 13-25.
ISSN 0022-1996
DOI: https://doi.org/10.1016/j.jinteco.2012.06.001

Abstract in another language

This paper characterizes analytically the optimal tariff of a large one-sector economy with monopolistic competition and firm heterogeneity in general equilibrium, thereby extending the small-country results of Demidova and Rodríguez-Clare (JIE, 2009) and the homogeneous firms framework of Gros (JIE, 1987). The optimal tariff internalizes a mark-up distortion, an entry distortion, and a terms‐of-trade externality. It is larger when the dispersion of firm-level productivities is higher, and the country's relative size or relative average productivity is bigger. Furthermore, in the two-country Nash equilibrium, tariffs turn out to be strategic substitutes. Small or poor economies set lower Nash tariffs than large or rich ones. Lower transportation costs or smaller fixed market entry costs induce higher equilibrium tariffs and larger welfare losses relative to the case of zero tariffs. Similarly, cross-country productivity or size convergence, and higher firm-level productivity dispersion increase the global welfare loss due to non-cooperative tariff policies. These results suggest that post WWII trends have increased the relative merits of the WTO.

Further data

Item Type: Article in a journal
Refereed: Yes
Keywords: Heterogeneous firms; Optimal tariffs; Tariff wars; World Trade Organization
Subject classification: F12; F13
Institutions of the University: Faculties > Faculty of Law, Business and Economics > Department of Economics > Lehrstuhl Volkswirtschaftslehre VI: Empirische Wirtschaftsforschung
Faculties > Faculty of Law, Business and Economics > Department of Economics > Lehrstuhl Volkswirtschaftslehre VI: Empirische Wirtschaftsforschung > Lehrstuhl für Volkswirtschaftslehre VI: Empirische Wirtschaftsforschung - Univ.-Prof. Dr. Mario Larch
Faculties
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
Date Deposited: 14 Oct 2015 13:44
Last Modified: 14 Oct 2015 13:44
URI: https://eref.uni-bayreuth.de/id/eprint/16650