Whom to send to Doha? The shortsighted ones!

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Why are empirically observed tariffs so much lower than theoretically calculated Nash-equilibrium tariffs? We argue that this gap can be narrowed by using a dynamic model instead of a static model. This approach has two advantages. (i) It allows us to take account of the transitional process after a change in tariffs. (ii) It allows us to take account of the shortsightedness of policy makers. We show that Nash-equilibrium tariffs based on a dynamic trade model are lower than Nash-equilibrium tariffs based on a static model. We also show that shortsighted politicians tend to set lower tariffs than politicians with a long planning horizon. Abstract Why are empirically observed tariffs so much lower than theoretically calculated Nash-equilibrium tariffs? We argue that this gap can be narrowed by using a dynamic model instead of a static model. This approach has two advantages. (i) It allows us to take account of the transitional process after a change in tariffs. (ii) It allows us to take account of the shortsightedness of policy makers. We show that Nash-equilibrium tariffs based on a dynamic trade model are lower than Nash-equilibrium tariffs based on a static model. We also show that shortsighted politicians tend to set lower tariffs than politicians with a long planning horizon. Terms of use: Documents in

The Dynamic and Distributional Aspects of Import Tariffs

“…So far this perfectly resembles the results in Larch and Lechthaler (2013) and Lechthaler (forthcoming).…”

“…Thus as in Larch and Lechthaler (2013) and Lechthaler (forthcoming) a policy maker who is interested in maximizing aggregate consumption sets a lower tariff the shorter his time horizon.…”

Ben Bernanke in Doha: The Effect of Monetary Policy on Optimal Tariffs

“…One of the main novelties of this paper compared to the analysis in Larch and Lechthaler () is the introduction of sticky prices, which implies a potential role for monetary policy. In a model with sticky prices, monetary policy has real short‐run effects and thus can influence the adjustment process, even if it does not affect the steady state.…”

“…An important question raised in Larch and Lechthaler () is how the planning horizon of a policymaker affects the setting of tariffs. Typically tariffs are set by elected politicians (at least in most developed countries), who tend to have a shorter planning horizon than infinity.…”

“…Typically tariffs are set by elected politicians (at least in most developed countries), who tend to have a shorter planning horizon than infinity. In Larch and Lechthaler (), it was shown that politicians with a shorter planning horizon set lower tariffs, due to the slow adjustment of consumption.…”