The Effects of Tariffs and Real Wages on Employment in a Barro-Grossman Model of an Open Economy

Abstract

This paper deals with the effects of tariffs, changes in real wages, and devaluations on employment in a disequilibrium model of a small open economy. It is e.g. shown that the impacts of tariffs under a flexible exchange rate regime are insensi tive to the kind of disequilibrium which prevails. The introduction of tariffs will decrease total employment. Analogous problems are analyzed under a fixed exchange rate regime. We show that the introduction of tariffs is now a better remedy against unemployment. We also indicate how changes in real wages and devaluations can be used to cure short-run unemployment. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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