Download This PaperTariffs in an Economy with Incomplete Markets and Unemployment
29 Pages Posted: 25 May 2011 Last revised: 25 May 2022
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: 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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