Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/88116
Authors: 
Tuinstra, Jan
Wegener, Michael
Westerhoff, Frank
Year of Publication: 
2013
Series/Report no.: 
BERG Working Paper Series 91
Abstract: 
We develop a simple two-region, cobweb-type dynamic equilibrium model to demonstrate the existence of optimal trade barriers. A pure comparative statics analysis of our model suggests that a reduction of trade barriers always enhances welfare. However, taking a dynamic perspective reveals that nonlinear trade interactions between the two regions may generate endogenous price fluctuations which can hamper both consumer and producer surplus. Finally, we allow special interest groups, such as consumers or producers from the two regions, to lobby for a particular level of trade barriers. Our model predicts that time-varying trade barriers may be another channel for market instability.
Subjects: 
cobweb dynamics
market interactions
optimal import tariffs
welfare analysis
political economy of trade barriers
JEL: 
D72
F13
H21
ISBN: 
978-3-943153-06-4
Document Type: 
Working Paper

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