Discretionary Trade Policy and Excessive Protection

摘要: This paper proposes a positive theory of tariff formation based on the idea that optimal trade policy may be time inconsistent. A benevolent government, with redistributive goals, have an incentive to provide unexpected protection, since effects are larger if is unanticipated. The suboptimal, but consistent, involves excessive amount protection. Furthermore, in time-consistent equilibrium, tariffs dominate production subsidies. Thus, requirement consistency can lead reversal traditional normative ordering and subsidies as instruments policy. Copyright 1987 by American Economic Association.