The Consumer Tax Equivalent of a Tariff with Imperfect Substitutes

In estimating the Consumer Tax Equivalent (CTE) and Producer Subsidy Equivalent (PSE) of a tariff, it is often assumed that the imported good is a perfect substitute for the relevant locally made good. However, in evaluating the economy-wide effects of a change in tariff using general equilibrium models, it is common to assume that the imported good is an imperfect substitute (so-called Arming-ton assumption)¹ This paper estimates CTE assuming imperfect substitution in order to be consistent with the assumption commonly used in general equilibrium models. It shows how estimates of the CTE and PSE are sensitive to assumptions about the substitution elasticity of demand and the price elasticity of supply for the locally made good.     

SOME EMPIRICAL EFFECTS OF USING PERMANENT STRIKER REPLACEMENTS

This study uses survey data to examine issues related to legislation that would bar employers from permanently replacing striking workers. Hiring permanent replacements does not significantly affect the proportion of full capacity at which the employer operates struck facilities but significantly decreases the proportion of bargaining unit members who get back their jobs after a strike. More controversially, firms hiring permanent replacements obtain less favorable collective bargaining contracts than do firms that do not hire permanent replacements .