Review article

COMPARATIVE STATIC ANALYSIS OF TARIFFS IN PARTIAL EQUILIBRIUM MODEL: SMALL COUNTRY CASE

Hrvoje Jošić orcid.org/0000-0002-7869-3017 ; Croatian National Bank
Mislav Jošić ; Croatian National Bank

Abstract

According to standard economic theory, imposition of import tariff s in a small country always leads to suboptimal allocation of resources and generates irretrievable losses for the society. Nevertheless, governments oft en decide to impose tariff measures in order to balance the budget or to retaliate against protectionist trade policy of their trade partners. This paper gives some insight into the microeconomic aspects of tariff imposition by analysing changes in consumers’ welfare, producers’ welfare and net welfare of the society. In addition to that, detailed geometric and algebraic analysis was carried out in order to elucidate the conditions under which tariff imposition can be beneficial for the government by introducing
the maximum revenue tariff. Furthermore, prohibitive tariff and autarchy equilibrium associated with it was tackled in detail. In order to assess the net effects of import tariff imposition, the partial equilibrium model was used with several propositions being formulated from the linearised model based on a small country assumption. Finally, the propositions were carefully elaborated with special emphasis on changes ininitial parameters.

Keywords

trade policy; dead-weight loss; maximum revenue tariff; optimum welfare-tariff; small country

Hrčak ID:

150941

URI

https://hrcak.srce.hr/150941

Publication date:

20.12.2015.

Article data in other languages: croatian

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