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TRADE, LUXURY GOODS, AND A GROWTH-ENHANCING TARIFF

Published online by Cambridge University Press:  24 April 2017

Leonid V. Azarnert
Leonid V. Azarnert*
Affiliation:
Ariel University
*
Address correspondence to: Leonid V Azarnert, Department of Economics and Business Administration, Ariel University, Ariel, 40700, Israel; e-mail: [email protected].
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Abstract

This article presents a Ricardian model of trade with learning-by-doing to study the effect of barriers to trade in products with low growth potential on the long-run economic growth. The model shows that, when elasticity of demand for the product with a lower learning potential is greater than unity, a tariff imposed on this product can shift the demand toward the product with a higher learning potential, thus enhancing growth in the exporter economy. Therefore, although with some possible negative effect on the welfare in the short run, barriers for the export of natural luxury goods may be beneficial for developing economies in the long run, since they increase their incentive to develop sectors with higher growth potential.

Keywords

Trade BarriersLuxury GoodsLearning-by-Doing
Type
Articles
Information
Macroeconomic Dynamics , Volume 22 , Issue 6 , September 2018 , pp. 1462 - 1474
Copyright
Copyright © Cambridge University Press 2017 

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Footnotes

I would like to thank an anonymous referee for comments that helped improve the readability of the paper. Comments of participants in the 2015 annual conference of the European Trade Study Group conference in Paris are gratefully acknowledged.

References

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