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The new-classic economists confirm that all trade distortions out of governmental economic policies may deviate the economic growth rate and per capita income in a long-term process of transitional period from its main path.
In this paper and in order to show the effects of tariffs on economic growth, at
first we maximize the household utility function in a neo-classic model. The period
of our study is from 1961 up to 1998. The effects of tariff on economic growth have
been considered in two different scenarios. The results of both confirm that any
trade restrictions may result in a reduction in economic growth rate. In this manner,
the effect of tariff rate on economic growth in post- revolution period in comparison
with pre-revolution one has decreased due to reduction in degree of openness and reduction of population growth rate. On the other hand, any lower depreciation rate may have a negative effect on economic growth. Therefore, we conclude that trade, free from any limitations, may pave the way for economic growth and reveal its positive effect on it.