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Title:Whom to Send to Doha? The Shortsighted Ones! PDF Logo
Authors:Larch, Mario
Lechthaler, Wolfgang
Issue Date:2011
Series/Report no.:Kiel Working Papers 1695
Abstract:Why are empirically observed tariffs so much lower than theoretically calculated Nash-equilibrium tariffs? We argue that this gap can be narrowed by using a dynamic model instead of a static model. This approach has two advantages. (i) It allows us to take account of the transitional process after a change in tariffs. (ii) It allows us to take account of the shortsightedness of policy makers. We show that Nash-equilibrium tariffs based on a dynamic trade model are lower than Nash-equilibrium tariffs based on a static model. We also show that shortsighted politicians tend to set lower tariffs than politicians with a long planning horizon.
Subjects:Bubbles
fiscal theory of the price level
collateral constraints
neutrality
transversality conditions
JEL:F11
F12
F13
Document Type:Working Paper
Appears in Collections:Kieler Arbeitspapiere, IfW
Publikationen von Forscherinnen und Forschern des IfW

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