The Efficient Tariff: Systematically Balancing Security and Welfare Concerns

The American Economist, Vol 36, No 1, 1992, pp 44-52.

9 Pages Posted: 13 Feb 2017

Date Written: March 1, 1992

Abstract

Imposing a tariff on imports of petroleum has two major effects that encourage conflicting public-policy responses. One effect is the well-documented welfare loss suffered by the domestic economy as a result of the tariff's distortional effects. The other effect is the potentially positive effect that a tariff can have on national security. When tariffs decrease, more of domestic demand is supplied by foreign suppliers — which increases the expected value of the economic damage caused by potential future embargoes. The author derives the equation for the “marginal disruption risk cost” and equates this to the marginal welfare cost to find an “efficient” tariff.

Keywords: tariff, petroleum, embargo

JEL Classification: F13, f52

Suggested Citation

Ashton, Michael, The Efficient Tariff: Systematically Balancing Security and Welfare Concerns (March 1, 1992). The American Economist, Vol 36, No 1, 1992, pp 44-52. . Available at SSRN: https://ssrn.com/abstract=2915287

Michael Ashton (Contact Author)

Enduring Investments LLC ( email )

United States

HOME PAGE: http://www.enduringinvestments.com

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