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Title: |
Optimal Policy Intervention to Reduce Import
Dependence |
| Author: |
Nettle, Richard
S.; Britten-Jones, Mark; Anderson, Kym |
| Author
Affiliation: |
U Adelaide |
| Source: |
International Economic Journal, Winter 1987, v. 1, no. 4, pp. 101-106 |
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Publication Date: |
Winter 1987 |
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Abstract: |
Should a country wish to reduce its
dependence on imports of a certain commodity, an import tariff is
typically recommended as the first-best (lowest-cost) policy instrument
for achieving this non-economic objective. This note shows that while
this is correct if the objective is to restrain imports to a certain
quantity, it is not correct if the target is to reduce imports to a
certain percentage of domestic consumption. In the latter case, a
tariff-funded subsidy to producers is also required, the extent of which
is larger the smaller the domestic price elasticities of demand and
supply for the commodity. |
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