Tariffs and Unemployment.

Historically, a powerful motive for protection has been the desire to increase employment during a period of recession or stagnation. Protection creates jobs by raising the price of imports and diverting demand toward domestic duction Figure 15-8 demonstrates this effect. As domestic demand increases, firms will hire more workers and unemployment will fall.2 This too is a beggar-thy-neighbor policy. for it raises domestic demand at the expense of output and employment in other countries.

Tariffs and import protection are an inefficient way to create jobs or to lower unemployment.A more effective way to increase productive employment is through domestic monetary and fiscal policy.