Tariff reforms with rigid wages

Rod Falvey, Udo Kreickemeier*

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

11 Citations (Scopus)

Abstract

This paper analyses the effects of tariff reforms on welfare and market access in a competitive small open economy, which is characterised by involuntary unemployment due to non-market clearing wages that are fixed either in terms of the numeraire or in real terms. We show that recent tariff-reform results can be extended to integrated reforms of tariffs and the wage rate, and that the inherent tension between reforms that increase welfare and market access carries over. We also derive welfare increasing tariff-reform strategies that keep the wage rate constant and show that this tension may be attenuated.

Original languageEnglish
Pages (from-to)23-39
Number of pages17
JournalEconomic Theory
Volume41
Issue number1
DOIs
Publication statusPublished - 2009
Externally publishedYes

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