Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/161633
Authors: 
Lechthaler, Wolfgang
Mileva, Mariya
Year of Publication: 
2017
Series/Report no.: 
Kiel Working Paper 2082
Abstract: 
We use a dynamic trade model with two sectors and two types of workers to analyze the optimal setting of income-generating tariffs. This approach allows us to take account of adjustment dynamics, distributional aspects and the time horizon of policy makers and workers. In response to a unilateral increase in tariffs aggregate consumption increases only sluggishly so that policy makers with a short time horizon tend to set lower tariffs. Workers' preferences for tariffs depend on the sector where they are employed as well as their skill class, with the relative weight of both aspects determined by the time horizon of the workers. Unskilled workers in the unskilledintensive sector are the ones most in favor of protectionism and might even benefit from a trade war.
Subjects: 
protectionism
optimal tariffs
dynamic trade model
inequality
JEL: 
F11
F12
F13
Document Type: 
Working Paper

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