Footnote:
In: Review of International Economics, Vol. 11, pp. 101-113, 2003
Description:
Incorporating weakly nonseparable preferences into the familiar time-preference model, the author emphasizes a role of steady-state welfare changes in determining the effect of permanent tariffs on the current account. The effect consists of a welfare effect, due to steady-state welfare changes, which is negative (positive) when preferences toward imports are more (less) wealth-enhanced than toward exports; and a substitution effect, which occurs only with initial distortion. Even without initial distortion, a marginal tariff has a first-order welfare effect on the current account. Its sign does not depend on whether impatience is increasing or decreasing in wealth