Optimal policy intervention to reduce import dependence
Date
1987
Authors
Nettle, Richard S.
Britten-Jones, Mark
Anderson, Kym
Journal Title
Journal ISSN
Volume Title
Publisher
Taylor & Francis (Routledge)
Abstract
Should a country wish to reduce its dependence on imports of a certain commodity,
an import tariff is typically recommended as the first-best (lowest-cost) policy instrument
for achieving this non-economic objective. This note shows that while this is correct
if the objective is to restrain imports to a certain quantity, it is not correct if the
target is to reduce imports to a certain percentage of domestic consumption. In the
latter case, a tariff-funded subsidy to producers is also required, the extent of which is
larger the smaller the domestic price elasticities of demand and supply for the commodity.
Description
Keywords
import, tariff, policy, price, elasticities, domestic
Citation
Collections
Source
International Economic Journal
Type
Journal article