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Lerner Symmetry: A Modern Treatment†

Lerner Symmetry: A Modern Treatment† AbstractWhich policies are protectionist and which ones are not? The Lerner Symmetry Theorem establishes that import tariffs and export taxes are equally protectionist. In this paper we provide a modern treatment of this classical result, highlighting the importance of multinational firms, global imbalances, and imperfect competition. Under perfect competition, the result follows from the separability of consumption and production across countries, ruling out tourism and some forms of multinational firms, but not others. Though we do not require trade balance, the role of initial assets is subtle: our result rules out foreign ownership of domestic assets, but does not constrain domestic ownership of foreign assets. Under imperfect competition, our result effectively rules out all multinational firms. We conclude by discussing the implications for border adjustment taxes. (JEL D41, D43, F13, F14, F23) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review: Insights American Economic Association

Lerner Symmetry: A Modern Treatment†

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References (23)

Publisher
American Economic Association
Copyright
Copyright © 2019 © American Economic Association
ISSN
2640-205X
eISSN
2640-2068
DOI
10.1257/aeri.20170006
Publisher site
See Article on Publisher Site

Abstract

AbstractWhich policies are protectionist and which ones are not? The Lerner Symmetry Theorem establishes that import tariffs and export taxes are equally protectionist. In this paper we provide a modern treatment of this classical result, highlighting the importance of multinational firms, global imbalances, and imperfect competition. Under perfect competition, the result follows from the separability of consumption and production across countries, ruling out tourism and some forms of multinational firms, but not others. Though we do not require trade balance, the role of initial assets is subtle: our result rules out foreign ownership of domestic assets, but does not constrain domestic ownership of foreign assets. Under imperfect competition, our result effectively rules out all multinational firms. We conclude by discussing the implications for border adjustment taxes. (JEL D41, D43, F13, F14, F23)

Journal

American Economic Review: Insights – American Economic Association

Published: Jun 1, 2019

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