Working Paper: CEPR ID: DP58
Authors: J. Peter Neary; Frances P. Ruane
Abstract: This paper studies the welfare losses from tariff protection in a general model of a small open economy where some factors are internationally mobile. It is shown that, as long as the economy remains incompletely specialised international factor mobility must raise the cost of protection. This result is illustrated in the context of the specific-factors and Heckscher-Ohlin models. In addition, we examine its relationship to earlier work on immiserising capital inflows and on negative shadow prices for factors of production. This allows us to synthesise a number of recent results within a common framework.
Keywords: international capital mobility; shadow prices; protection; cost of tariff-induced factor movements
JEL Codes: 411; 441
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| international capital mobility (F21) | cost of protection (D18) |
| tariff protection (F13) | consumption losses (E21) |
| tariff protection (F13) | production losses (D20) |
| international factor mobility (F20) | welfare loss (D69) |
| tariff-induced capital movements (O24) | welfare loss (D69) |
| capital mobility (F20) | tariff-induced international factor movements (F29) |