Multisectoral Macroeconomic Models and Optimum Tariffs

Zalai, E. (1983). Multisectoral Macroeconomic Models and Optimum Tariffs. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-83-057

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Abstract

The treatment of foreign trade has a great influence on the results obtained from multisectoral macroeconomic models. This manifests itself clearly in the problem of overspecialized solutions, which arises in most of the models currently in use. This unwanted phenomenon is treated differently in the two main classes of models: programming models and general equilibrium models.

The paper discusses the theoretical and methodological problems related to this issue using a special comparative framework, in terms both of the above two classes of applied models and in terms of laissez-faire equilibrium and planner's optimum. Attention is focussed on alternative export specifications and optimum tariff problems. The optimum tariff problem is discussed from the point of view of both large (the usual case) and small open economies, The argument is illustrated by numerical results based on two models of the Hungarian economy.

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