Tariffs and Sectoral Adjustments in an Open Economy
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NBER Working Paper No. 3315 (Also Reprint No. r1527)
Issued in February 1991
NBER Program(s): ITI IFM
This paper analyzes the impact of a tariff on sectoral adjustments in an economy which produces two traded consumption goods, one of which is exported, and a non-traded investment good. The importance of sectoral capital intensities is emphasized. In particular, the qualitative dynamic adjustment depends upon the relative capital intensities of the import-competing consumption good sector and the non-traded investment good sector. Sectoral labor allocation effects are analyzed and the long-run effect on aggregate capital accumulation is shown to depend upon the relative capital intensities of the import and export sectors. Temporary as well as permanent tariffs are discussed.
Published: Journal of Economic Dynamics and Control, Vol. 15, No. 1, pp. 53-89, (1991) .
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