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. It was proposed by Lloyd Metzler in 1949 upon examination of tariffs within the Heckscher–Ohlin model. The paradox has roughly the same status as immiserizing growth and a transfer that makes the recipient worse off.
The strange result could occur if the exporting country's offer curve is very inelastic. In this case, the tariff lowers the duty-free cost of the price of the import by such a great degree that the effect of the improvement of the tariff-imposing countries' terms of trade on relative prices exceeds the amount of the tariff. Such a tariff would not protect the industry competing with the imported goods.
- Casas, François R.; Choi, Eun K. (1985). "The Metzler Paradox and the Non-equivalence of Tariffs and Quotas: Further Results". Journal of Economic Studies. 12 (5): 53–57. doi:10.1108/eb002612.
- Metzler, Lloyd A. (1949). "Tariffs, the Terms of Trade, and the Distribution of National Income". Journal of Political Economy. 57 (1): 1–29. doi:10.1086/256766.
- Krugman and Obstfeld (2003), p. 112
- de Haan, Werner A.; Visser, Patrice (December 1979). "A note on tariffs, quotas, and the Metzler Paradox: An alternative approach". Weltwirtschaftliches Archiv. 115 (4): 736–741. doi:10.1007/bf02696743.
- Krugman and Obstfeld (2003), p. 113