Metzler paradox
Encyclopedia
In economics
, the Metzler paradox (named after the American economist Lloyd Metzler
) is the theoretical possibility that the imposition of a tariff
on import
s 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.
The strange result could occur if the exporting country's offer curve
is very inelastic. In this case, the tariff lowers the duty-free cost of the price of the import by such a great degree that the effect of the improvement of the tariff-imposing countries' terms of trade
on relative prices exceeds the amount of the tariff. Such a tariff would not protect the industry competing with the imported goods.
It is deemed to be unlikely in practice.
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
, the Metzler paradox (named after the American economist Lloyd Metzler
Lloyd Metzler
Lloyd Appleton Metzler was an American economist best known for his contributions to international trade theory. He was born at Lost Springs, Kansas in 1913. Although most of his career was spent at the University of Chicago, he was not a member of the Chicago school, but rather a Keynesian...
) is the theoretical possibility that the imposition of a tariff
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
on import
Import
The term import is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is referred to an "importer" who is based in the country of import whereas the overseas based seller is referred to as an "exporter". Thus...
s may reduce the relative internal price of that good. It was proposed by Lloyd Metzler
Lloyd Metzler
Lloyd Appleton Metzler was an American economist best known for his contributions to international trade theory. He was born at Lost Springs, Kansas in 1913. Although most of his career was spent at the University of Chicago, he was not a member of the Chicago school, but rather a Keynesian...
in 1949 upon examination of tariffs within the Heckscher–Ohlin model. The paradox has roughly the same status as immiserizing growth
Immiserizing growth
Immiserizing growth is a situation first proposed by Jagdish Bhagwati, in 1958, where economic growth could result in a country being worse off than before the growth...
and a transfer that makes the recipient worse off.
The strange result could occur if the exporting country's offer curve
Offer curve
In economics and particularly in international trade, an offer curve shows the quantity of one type of product that an agent will export for each quantity of another type of product that it imports...
is very inelastic. In this case, the tariff lowers the duty-free cost of the price of the import by such a great degree that the effect of the improvement of the tariff-imposing countries' terms of trade
Terms of trade
In international economics and international trade, terms of trade or TOT is /. In layman's terms it means what quantity of imports can be purchased through the sale of a fixed quantity of exports...
on relative prices exceeds the amount of the tariff. Such a tariff would not protect the industry competing with the imported goods.
It is deemed to be unlikely in practice.