Skip to main content
Article thumbnail
Location of Repository

Tariff, Growth, and Welfare

By Shun-Fa Lee


We develop a two-country (Home and Foreign) by two-good (consumption good and investment good) by one factor (capital) endogenous growth model with international knowledge spillover to study the relationship between an import tariff and economic growth and welfare. First, unlike the past literature, we do not need to make an assumption such that the growth rates between countries are identical in a balanced growth path (BGP). Second, we show that there exists a unique and saddle-point BGP with both countries being incompletely specialized. Third, a higher import tariff on the consumption good in the domestic country may boost (reduce) the rate of economic growth when the foreign (domestic) country has an absolute advantage in the investment good. Finally, a rise in the tariff rate by one country may improve world welfare under some parameter spaces.two-country endogenous growth model, international knowledge spillover, import tariff, economic growth, welfare

OAI identifier:

Suggested articles


  1. (1990). A convex model of equilibrium growth,
  2. (2007). A two-country dynamic model of international trade and endogenous growth: Multiple balanced growth paths and stability,
  3. (2005). A two-country model of endogenous growth,
  4. (1990). Comparative advantage and long-run growth,
  5. (1990). Endogenous technological change,
  6. (2003). Factor accumulation and trade: dynamic comparative advantage with endogenous physical and human capital,
  7. (1993). Fiscal policy and economic growth,
  8. (1998). Free trade, growth, and convergence,
  9. (2002). Geographic localization of international technology diffusion,
  10. (1997). Growth and interdependence,
  11. (2006). Growth, revenue, and welfare effects of tariff and tax reform: win-win-win strategies,
  12. (2009). Import tariffs and growth in a model with habits, International Trade and Economic Dynamics, edited by Takashi Kamihigashi and Laixun Zhao,
  13. (1996). Import tariffs and growth in a small open economy,
  14. (1986). Increasing returns and long-run growth,
  15. (2001). Indeterminacy and endogenous growth with social constant returns.
  16. (2000). Indeterminacy under constant returns to scale in multisector economics.
  17. (1991). International trade with endogenous technological change,
  18. (1993). International trade, distortions, and long-run economic growth,
  19. (2002). Interpreting the tariff-growth correlation of the late nineteenth century, NBER Working Paper Series,
  20. (2001). Intersectoral external effects, multiplicities and indeterminacies.
  21. (2002). Intersectoral externalities and indeterminacy.
  22. (1991). Long-run policy analysis and long-run growth,
  23. (2003). On intersectoral allocations, factors substitutability and multiple long-run growth paths.
  24. (1988). On the mechanics of economic development,
  25. (1996). Openness and growth: a time series, cross-country analysis for developing countries,
  26. (2006). Tariff and tax reform: dynamic implications.
  27. (2000). Tariffs and growth in the late nineteenth century,
  28. (1962). The economic implications of learning by doing.
  29. (1979). The welfare effect of tariff rate reductions in a many-country world,
  30. (2003). Trade openness and economic growth: a cross-country empirical investigation,
  31. (1992). Trade orientation, distortions and growth in developing countries,
  32. (1993). Welfare analysis of tariff and without international change with transfers,
  33. (1989). Welfare improving tariff changes: a case of many goods and countries,
  34. (2004). Why did the tariff-growth correlation change after

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.