NORTH-SOUTH ASYMMETRY IN TARIFF BARGAINING: A BLESSING FOR THE URBAN UNEMPLOYMENT?

In this study, North-South asymmetries are incorporated into a general equilibrium model to re-examine tariff bargaining. The asymmetric two-country model indicates that an import tariff charged by the North generates positive externalities that ameliorate structural unemployment in the South. The findings of this study yield two critical respects. First, the consideration of the urban unemployment in the South may reverse the consensus that a reciprocal tariff concession benefits both of the negotiators. Second and hence, this suggests that developing countries may bargain with opponents by manipulating second-best tariffs.

Automated summary

The study incorporating North-South asymmetries into a general equilibrium model suggests that import tariffs charged by the North can have positive externalities ameliorating structural unemployment in the South. It also implies that developing countries may benefit from bargaining by manipulating second-best tariffs.