Tariff Wars and Trade Deals with Costly Government |
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| Authors: | John Burbidge Gordon Myers |
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| Institution: | Department of Economics, University of Waterloo, Waterloo, ON, N2L 3G1, Canada; . Department of Economics, Simon Fraser University, Burnaby, BC, V5A 1S6, Canada; . |
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| Abstract: | The authors study a simple model of tariff wars and trade deals in which government revenue collection and disbursement uses resources. The introduction of costly governments leads to lower non‐cooperative tariffs, the possibility that a less costly government may win a tariff war, and fully cooperative trade deals where countries lower tariffs but do not eliminate them, even with lump‐sum taxes and transfers. |
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