Toward an Integrated Theory of Tariffs

Abstract

Economists have long recognized that the effects of a single tariff are numerous. In his textbook on international trade C.P. Kindleberger cites eight: on production, consumption, government tax revenue, terms of trade, balance of payments, income distribution, aggregate demand, and competition. For the underdeveloped economies, which are the particular concern of this paper, each of the effects of a tariff may be important to the success of development efforts. Given that each good can only bear one tariff, the level of that single policy instrument must be chosen in light of its many simultaneous effects on the economy. This paper, then, seeks way in which tariff theory can be rendered more relevant to the real dilemmas of economic policy.