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Tariffs in Monopolistic Competition Models with Leisure-Consumption Trade-Off

出版	SSRN, 2004
URL	http://books.google.com.hk/books?id=rCDizwEACAAJ&hl=&source=gbs_api

註釋The normative analysis of monopolistic competition models of trade suggests that even for a small country a small tariff is welfare improving [Gros (1987) and Helpman and Krugman (1989, ch. 7)]. This note introduces a consumption-leisure trade-off to endogenize labor supply resulting in ambiguous welfare effects of small ad-valorem tariff protection. Furthermore, disentangling market power and national returns to scale from international returns to scale [see Ethier (1982) and Benassy (1996 and 1998)] sheds light on the nature of this ambiguity: While market power based on national returns to scale encourages tariff protection via the terms of trade effect, international returns to scale have a discouraging effect in the presence of preferences for leisure: the tariff revenue impact reduces labor supply in the tariff-imposing country, and thus the number of producers, i.e. the international division of labor. A small tariff is welfare reducing when the terms of trade effect is smaller than the international scale effect.