The dynamic effects of contingent tariffs

This paper develops a specific-factor variant of the 'quality ladders' mode l without the scale effect property. We analyze the dynamic effects of cont ingent tariffs that are imposed on imports whenever domestic firms lose the ir global technological leadership positions to foreign firms. Small 'rent- extracting' contingent tariffs do not benefit domestic firms that fall behi nd and are negatively related to the global rate of technological change in the short run. Large 'protective' contingent tariffs allow domestic techno logical laggards to capture the domestic market and are positively related to the global rate of technological change in the short run. (C) 1999 Elsev ier Science B.V. All rights reserved.