Abstract
Optimal tariffs allow a country to exploit its market power in international trade. A country can improve its terms of trade by unilaterally restricting its exports if it faces a downward-sloping demand for them or restricting its imports if it faces an upward-sloping foreign export supply. This argument against unilateral free trade is over 150 years old but it remains central to modern theories that explain trade agreements and their rules. This, along with recent evidence that prior to such agreements countries exploit their market power in trade, shows that optimal tariffs may be an important positive theory of protection.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Bibliography
Bagwell, K., and R.W. Staiger. 1999. An economic theory of GATT. American Economic Review 89: 215–248.
Bagwell, K., and R.W. Staiger. 2002. The economics of the world trading system. Cambridge, MA: MIT Press.
Bhagwati, J., and V.K. Ramaswami. 1963. Domestic distortions, tariffs and the theory of optimum subsidy. Journal of Political Economy 71: 44–50.
Bickerdike, C.F. 1906. The theory of incipient taxes. Economic Journal 16: 529–535.
Bickerdike, C.F. 1907. Review of A.C. Pigou’s protective and preferential import duties. Economic Journal 17: 98–108.
Brander, J.A., and B.J. Spencer. 1984. Tariff protection and imperfect competition. In Monopolistic competition and international trade, ed. H. Kicrzkowski. Oxford: Oxford University Press.
Broda, C., N. Limão, and D. Weinstein. 2006. Optimal tariffs: The evidence. Working Paper No. 12033. Cambridge, MA: NBER.
Edgeworth, F.Y. 1894. The theory of international values. Economic Journal 4: 35–50.
Graaf, J.V. 1949–50. On optimum tariff structures. Review of Economic Studies 17, 47–59.
Gros, D. 1987. A note on the optimal tariff, retaliation and the welfare loss from tariff wars in a framework with intra-industry trade. Journal of International Economics 23: 357–367.
Grossman, G., and E. Helpman. 1995. Trade wars and trade talks. Journal of Political Economy 103: 675–708.
Johnson, H.G. 1950. Optimum welfare and maximum revenue tariffs. Review of Economic Studies 19: 28–35.
Johnson, H.G. 1953–4. Optimum tariffs and retaliation. Review of Economic Studies 21, 142–153.
Jones, R.W. 1967. International capital movements and the theory of tariffs and trade. Quarterly Journal of Economies 81: 1–38.
Kaldor, N. 1940. A note on tariffs and the terms of trade. Economica 7: 377–380.
Katrak, H. 1977. Multi-national monopolies and commercial policy. Oxford Economic Papers 29: 283–291.
Kemp, M.C. 1966. The gains from international trade and investment: A neo-Heckscher–Ohlin approach. American Economic Review 65: 788–809.
Kreinin, M.E. 1961. Effect of tariff changes on the prices and volume of imports. American Economic Review 51: 310–324.
Lerner, A.P. 1936. The symmetry between import and export taxes. Economica 3: 306–313.
Mayer, W. 1981. Theoretical considerations on negotiated tariff adjustments. Oxford Economic Papers 33: 135–153.
Mill, J.S. 1844. Essays on some unsettled questions of political economy. London: Parker.
Rodriguez, C. 1974. The non-equivalence of tariffs and quotas under retaliation. Journal of International Economics 4: 295–298.
Scitovsky, T. 1942. A reconsideration of the theory of tariffs. Review of Economic Studies 9: 89–110.
Torrens, R. 1833. Letters on commercial policy. London: Longman.
Torrens, R. 1844. The budget: On commercial and colonial policy. London: Smith-Elder.
Author information
Authors and Affiliations
Editor information
Copyright information
© 2018 Macmillan Publishers Ltd.
About this entry
Cite this entry
Limão, N. (2018). Optimal Tariffs. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_1875
Download citation
DOI: https://doi.org/10.1057/978-1-349-95189-5_1875
Published:
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-95188-8
Online ISBN: 978-1-349-95189-5
eBook Packages: Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences