Tariff Escalation and Invasive Species Risk



DI * =


τι
θτIFG


(4)


Since PD=τI=αD*(α-1)+zII*, and D*+I*=DI*, we solve for D* and I*:

D* =τI
α-zI


z1K
α-zI


τI
θτIFG


1

θ1


and


(5)


αK

I * =

α-z


τI
θτIFG


1

θ-1      t

τI

α-zI


(6)


Parameter zI is assumed to be small enough so that α> zI . This leads to a condition for both
domestic and imported input to be positive as the following:

_         1 θ          _         1 θ

z1DI* Pi < αD1 * , or z1K [Θtifo ]1-θ 1 ]1-θ1 αK [Θtii,g ]1-θ 1 ]1-θ . (7)

Total welfare of the economy include the following components: the consumer surplus
associated with
FG consumption, the surplus from the derived demand of DI captured in the
profit equivalent to the producer surplus associated with the supply of
DFG, the producer surplus
associated with the supply of
D, and the tax revenues generated by the imposition of τIFG and τI .

Reducing tariff escalation via a final-good tariff decrease

We now reduce the tariff escalation by reducing the tariff (and the associated factor) on the
processed final good,
tIFG , to tINFGtIFG ( τINFGτIFG ) and keeping tI constant. The new
equilibrium, denoted by the double asterisk (**), is:

FG**=τN -γ

IFG


DFG**=


τι

Θun
τIFG


θ

θ-1___

K,


(8)

(9)




More intriguing information

1. National urban policy responses in the European Union: Towards a European urban policy?
2. The name is absent
3. The Economics of Uncovered Interest Parity Condition for Emerging Markets: A Survey
4. Constrained School Choice
5. Nietzsche, immortality, singularity and eternal recurrence1
6. The name is absent
7. Human Development and Regional Disparities in Iran:A Policy Model
8. The name is absent
9. ¿Por qué se privatizan servicios en los municipios (pequeños)? Evidencia empírica sobre residuos sólidos y agua.
10. 09-01 "Resources, Rules and International Political Economy: The Politics of Development in the WTO"