Precautionary Protectionism / Sharon Traiberman, Martin Rotemberg.

Format:

Book

Author/Creator:

Traiberman, Sharon.

Contributor:

National Bureau of Economic Research.

Rotemberg, Martin.

Series:

Working Paper Series (National Bureau of Economic Research) no. w30300.

NBER working paper series no. w30300

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

We develop a dynamic extension of Dornbusch et al. (1977) with "rustiness": the home country has relatively higher unit costs tomorrow for goods it is not producing today. We solve for optimal tariff policy when there is a potential for a crisis: an increase in demand for goods produced abroad. Optimally, the home planner never protects goods where comparative advantage is sufficiently low, not even the goods directly affected by the crises. However, for marginally competitive goods, the optimal policy trades off comparative advantage and demand. The extent of industrial policy is non-monotonic in both the size of the demand shock and in its variance.

Notes:

Print version record

July 2022.