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,...

The effect of terms of trade economy on the welfare of a small open economy is analyzed. It exports a homogeneous good and imports some brands of the differentiated good. It also produces some brands of the differentiated good which are not traded. A term of trade deterioration causes resources...