In economics, the Metzler paradox (named after the American economist Lloyd Metzler) is the theoretical possibility that the imposition of a tariff on imports may reduce the relative internal price of that good. It was proposed by Lloyd Metzler in 1949 upon examination of tariffs within the Heckscher–Ohlin model. The paradox has roughly the same status as immiserizing growth and a transfer that makes the recipient worse off.
This peculiar outcome could occur if the offer curve of the exporting country is highly inelastic. In such a scenario, the tariff reduces the duty-free cost of the imported goods to such an extent that the effect of improving the terms of trade of the tariff-imposing countries on relative prices outweighs the impact of the tariff. Such a tariff would not effectively protect the industry competing with the imported goods.
However, in practice, this scenario is deemed unlikely.
See also
References
- Casas, François R.; Choi, Eun K. (1985). "The Metzler Paradox and the Non-equivalence of Tariffs and Quotas: Further Results". Journal of Economic Studies. 12 (5): 53–57. doi:10.1108/eb002612.
- Metzler, Lloyd A. (1949). "Tariffs, the Terms of Trade, and the Distribution of National Income". Journal of Political Economy. 57 (1): 1–29. doi:10.1086/256766. S2CID 153833656.
- Krugman and Obstfeld (2003), p. 112
- de Haan, Werner A.; Visser, Patrice (December 1979). "A note on tariffs, quotas, and the Metzler Paradox: An alternative approach". Weltwirtschaftliches Archiv. 115 (4): 736–741. doi:10.1007/bf02696743. S2CID 153602151.
- Krugman and Obstfeld (2003), p. 113
Further reading
- Krugman, Paul R.; Obstfeld, Maurice (2003). "Chapter 5: The Standard Trade Model". International Economics: Theory and Policy (6th ed.). Boston: Addison-Wesley. p. 112. ISBN 0-321-11639-9.
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