Journal of Political Economy Vol. 86 No. 6 1978
The Protective Effect of a Tariff under Uncertainty
Abstract
We examine the protective effect of a tariff in a small economy with uncertainty and a stock market in which shares of firms are traded. In a deterministic economy, the allocation of resources is governed by commodity prices; in our economy, it is governed by equity prices and is dependent on commodity prices only to the extent that they influence equity prices. We show that in the absence of international trade in securities a tariff need not protect the import competing sector. In the presence of international trade in securities, a tariff always protects the import competing sector.
- DOI
- 10.1086/260731
- Volume
- 86
- Issue
- 6
- Pages
- 1131-1141
- Language
- en
- Sources
- openalex crossref