Abstract
This thesis undertakes theoretical and empirical analyses to estimate the welfare effects of tariffs on U.K. imports of manufactured products. The analyses differ from the standard model of tariffs and welfare by explicitly allowing for product differentiation between imports and home products and for home firms' prices exceeding their costs of production. The theoretical analysis makes use of a simple partial equilibrium model to examine the effects of tariffs on home industry's profit and on the welfare of consumers of home and foreign products. A prediction of the model is that tariffs may generate welfare gains as well as losses. Estimation of the welfare gains and losses required quantitative information about the manner in which home firms prices and output are affected by tariffs. This information was obtained with the help of multiple regression analyses involving a sample of forty U.K. industries. The regression estimates of the price-output response of home firms were then used to estimate the welfare effects of a hypothetical cut in U.K. tariffs. The calculations suggest that tariff reduction may generate welfare losses well in excess of any corresponding welfare gain.