Sewon Hur, Federal Reserve Bank of Cleveland

Sala 209

“On the Distributional Effects of International Tariffs”

Coautoreado con Daniel Carroll

Abstract: What are the distributional consequences of tariffs? We build a trade model with incomplete asset markets and households that are heterogeneous in their income, wealth, and labor skill. We increase bilateral tariffs by 20 percentage points and examine several budget-neutral fiscal policies for redistributing tariff revenue. Without redistribution, tariffs hurt all households, especially the poor and the skilled. With redistribution, lowering the labor income tax leads to lower economic activity but higher average welfare and a lower dispersion of welfare costs relative to lowering the capital income tax; nevertheless, both policies reduce average welfare. Finally, when tariff revenue is rebated to households as lump-sum transfers, tariffs can be welfare improving.