Notes on the Theory of Tariffs
نویسنده
چکیده
We suppose that there are two countries trading two commodities, country 1 exporting commodity 1 to country 2, and that country 1 imposes a tariff on its import of commodity 2 while country 2 remains passive and does not retaliate. We assume that preferences in country 1 are identical and homothetic. A classic theorem, going back to Mill (1844), Torrens (1844), and Bickerdike (1907), states that under these conditions, starting from free trade the imposition of a tariff by country 1 will improve its terms of trade and therefore its (potential) welfare. Denote country ks trade-demand function for commodity 2 by
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