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What is the effect on Home’s TOT and what are the effects of the

February 22, 2023

4: (10 points) Export and Import Tariffs: Suppose Home and Foreign have identical demand but Home is capital abundant (as in Q1 above).

a)
Now suppose Home imposes an export tariff (this is a tax placed on domestic goods as they are shipped out of the country). What is the effect on Home’s TOT and what are the effects of the tariff in Home? Show in a diagram and explain.

b)
Compare the export tariff to an import tariff. Are they similar? Different? How so?

c)
Discuss any implications for policy. Give the intuition.

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