Generating Optimal Tariffs in the Marketplace

It is demonstrated how market forces can substantially decrease the informational requirements facing the policymaker. An optimal trade policy can be instituted without knowing the optimal quantity of imports or exports. Estimates of the demand or supply schedules on the domestic side of the market...

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Veröffentlicht in:The Economic journal (London) 1984-12, Vol.94 (376), p.914-923
1. Verfasser: Collinge, Robert A.
Format: Artikel
Sprache:eng
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Zusammenfassung:It is demonstrated how market forces can substantially decrease the informational requirements facing the policymaker. An optimal trade policy can be instituted without knowing the optimal quantity of imports or exports. Estimates of the demand or supply schedules on the domestic side of the market are also unnecessary. Given only the portion of the foreign supply (demand) schedule in the area of the unknown optimal quantity of imports (exports), either of 2 policy instruments - a tariff or a quota - can elicit a quantity of imports (exports) to maximize domestic surplus. A partial-equilibrium model in which no retaliations occur provides the context for the analysis. Results show that it may be easier than previously believed to effectively ''beggar thy neighbor'' when domestic importers or exporters are competitive. Of course, it is also easier than previously believed for the neighbor to retaliate optimally.
ISSN:0013-0133
1468-0297
DOI:10.2307/2232303