Growth, Expectations, and Tariffs

44 Pages Posted: 4 May 2011

See all articles by Seppo Honkapohja

Seppo Honkapohja

Centre for Economic Policy Research (CEPR); Aalto University School of Business; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Aalto University - School of Business

Arja H. Turunen-Red

University of New Orleans - College of Business Administration - Department of Economics and Finance

Alan D. Woodland

University of New South Wales

Multiple version iconThere are 3 versions of this paper

Date Written: April 29, 2011

Abstract

We study a many country endogenous growth model in which decisions about innovation and new investment are influenced by growth expectations. Adaptive learning dynamics determine country-specific short run transition paths. Countries differ in basic structural parameters and may impose tariffs on imports of capital goods. Numerical experiments illustrate adjustment dynamics that follow the use of tariffs. We show that countries that limit trade in capital goods can experience dynamic gains both in growth and utility and that such gains persist the longer the larger the structural advantages of the region that applies tariffs. Substantial differences in the levels of innovation, consumption, output, and utility can appear, and asymmetries in economic outcomes that were present before trade restrictions are made more severe.

Keywords: endogenous growth, expectations, learning, short run dynamics, tariffs, complementary capital goods

JEL Classification: F430, F150

Suggested Citation

Honkapohja, Seppo and Honkapohja, Seppo and Turunen-Red, Arja H. and Woodland, Alan D., Growth, Expectations, and Tariffs (April 29, 2011). CESifo Working Paper Series No. 3435, Available at SSRN: https://ssrn.com/abstract=1831203 or http://dx.doi.org/10.2139/ssrn.1831203

Seppo Honkapohja

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Aalto University School of Business ( email )

, PO Box 21210
Aalto FI-00076
Finland

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Aalto University - School of Business

Finland

Arja H. Turunen-Red (Contact Author)

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States
504-280-6912 (Phone)
504-280-6397 (Fax)

HOME PAGE: http://www.uno.edu/~aturunen/

Alan D. Woodland

University of New South Wales ( email )

School of Economics
Sydney, NSW 2052
Australia
61293859707 (Phone)
61293136337 (Fax)

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