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

Abstract

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.