Does an Import Tariff Negatively Affect Economic Growth?
DOI:
https://doi.org/10.33423/jabe.v27i2.7583Keywords:
business, economics, general equilibrium model, ARDL model, unit root, cointegration, CUSUM test, Granger causality testAbstract
An import tariff raises the price of imports causing a rise in producer surplus and a fall in consumer surplus on importable products inducing their domestic producers to increase production, which then raises the demand for the factor used intensively and lowers that for the factors used less intensively in their production. Also, according to the Stolper-Samuelson theorem, under the assumption of full-employment and constant capital-labor ratio, this leads to a rise in the real earnings of the factor used intensively and a fall in the real earnings of the factors used less intensively of the products. If the total of gains in producer surplus and earnings of the intensive factor is more than the loss in consumer surplus plus and earnings of less intensive factors, the nation experiences a net economic growth. We apply the VAR model on US data over the period 1990-2020 and finds an import tariff to have no impact on U.S. income and, therefore, on U.S. economic growth.
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