It is shown that for a small open economy the welfare effects of a tariff on the import of the brands of a differentiated good depends crucially on the pattern of trade. The literature has shown that welfare rises when the domestic brands are nontraded. But when the domestic brands are traded,...

In models of trade with monopolistic competition, firms set prices above marginal cost. An example is provided in this paper in which, because of this, a growth in the labor force lowers welfare per capita. Copyright 1997 by Blackwell Publishing Ltd.