Metzler paradox

In economics, the Metzler paradox (named after the American economist Lloyd Metzler) is the theoretical possibility that the imposition of a tariff on imports may reduce the relative internal price of that good.^[1] It was proposed by Lloyd Metzler in 1949 upon examination of tariffs within the Heckscher–Ohlin model.^[2] The paradox has roughly the same status as immiserizing growth and a transfer that makes the recipient worse off.^[3]

This peculiar outcome could occur if the offer curve of the exporting country is highly inelastic. In such a scenario, the tariff reduces the duty-free cost of the imported goods to such an extent that the effect of improving the terms of trade of the tariff-imposing countries on relative prices outweighs the impact of the tariff. Such a tariff would not effectively protect the industry competing with the imported goods.

However, in practice, this scenario is deemed unlikely.^[4][5]

See also

• Leontief paradox
• Lerner paradox
• List of paradoxes
• Rybczynski effect