Tariffs in an Economy with Incomplete Markets and Unemployment

29 Pages Posted: 25 May 2011

See all articles by Raquel Fernández

Raquel Fernández

New York University - Leonard N. Stern School of Business, Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: September 1988

Abstract

This paper examines the optimal labor contract in a small open economy with incomplete markets under international price uncertainty. The effect on employment, wages, and profits of different realizations of the state of nature is studied and agents' preferences concerning the implementation of a tariff are determined. The implicit contract equilibrium is shown to be constrained Pareto optimal; unanticipated tariff policy cannot be Pareto improving over free trade.

Suggested Citation

Fernández, Raquel, Tariffs in an Economy with Incomplete Markets and Unemployment (September 1988). NBER Working Paper No. w2705. Available at SSRN: https://ssrn.com/abstract=1852077

Raquel Fernández (Contact Author)

New York University - Leonard N. Stern School of Business, Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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