Tariff structure and output adjustment in the presence of interindustry flows

This paper investigates the adjustment of gross and net outputs to a change in tariff structure in models involving interindustry flows. Various conditions for the normal price-gross-output relationship are derived in a two-good, two-primary-factor model. These conditions are expressed in terms of the degree and also the patterns of substitutability and complementarity between different inputs. In the special case where the produced input is not used in its own production, the paper shows that the abnormal relationship between prices and gross outputs can occur only if the two primary factors are complements to each other and their degree of complementarity is sufficiently high. Finally, the response of net outputs due to a change in tariff structure is explored in a general model allowing arbitrary numbers of goods and primary factors.