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The Optimal Tariff, Production Lags, and Time Consistency
The American Economic Review
  • Harvey E. Lapan, Iowa State University
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Published Version
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The optimal tariff for a large country equals the reciprocal of the foreign export elasticity of supply. However, if production decisions occur before consumption decisions, the ex ante optimal tariff is not time consistent because the ex post elasticity is less than the ex ante elasticity. We show all countries are worse off if the large country cannot precommit to its ex ante optimal tariff, and that all countries can gain if the large country taxes domestic production of importables.

This is an article from The American Economic Review 78 (1988): 395. Posted with permission.

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American Economic Association
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Citation Information
Harvey E. Lapan. "The Optimal Tariff, Production Lags, and Time Consistency" The American Economic Review Vol. 78 Iss. 3 (1988) p. 395 - 401
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