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Title: Optimal Tariffs in A Two-country R
Authors: 賴廷緯
Lai, Ting-Wei
Beladi, Hamid
Chen, Ping-ho
Chu, Hsun
Lai, Ching-chong
Contributors: 經濟系
Keywords: Optimal tariffs;Economic growth;R&D;Trade in intermediate goods
Date: 2021-06
Issue Date: 2022-04-11 13:25:16 (UTC+8)
Abstract: This paper examines the effect of a tariff on long-run growth and welfare in a two-country innovation-led growth model. We show that although raising the home country’s tariff reduces the growth and GDP of the foreign country, it will backfire by depressing R&D and growth of the home country. The Nash equilibrium tariffs can be positive, and they are larger when the government expenditure is more beneficial to private production and/or when the productivity of innovation is higher. The presence of positive Nash equilibrium tariffs provides a theoretical explanation for why countries have incentives to implement a tariff policy regardless of its negative effect on growth. Finally, the Nash equilibrium tariffs are higher than the globally optimal tariffs, that is, the levels that maximize the joint welfare of both countries.
Relation: Macroeconomic Dynamics, 1-25
Data Type: article
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