ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Effects of Tariffs on Foreign Prices

Effects of Tariffs on Foreign Prices Harsha V Singh A RECENT paper by Nambiar and Mehta (NM hereafter)1 suggests' that a tariff reduction may lead to higher prices charged by a monopolist exporter, to a developing country such as India, and a tariff increase is likely to result in a fall in the tariff- exclusive price, with the monopolist absorbing much of the tariff. NM use cross- section data for 1980 to show a negative correlation between the average tariff rate and the ratio of the price (unit value) charged for exports to India compared to the price charged for the 'same" product when exported to the rest of the world. The aim of this note is to question the results obtained by NM, whose article suffers from three main deficiencies. These are (a) An inaccurate and incomplete picture presented in their theoretical section.

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