Working Paper Series, Department of Economics, Copenhagen Business School
Alan D. Woodland and Pascalis Raimondos-Møller
Steepest Ascent Tariff Reforms
Abstract: This paper introduces the concept of a steepest ascent
tariff reform for a small open economy. By construction, it is locally
optimal in that it yields the highest gain in utility of any feasible
tariff reform vector of the same length. Accordingly, it provides a
convenient benchmark for the evaluation of the welfare effectiveness of
other well known tariff reform rules, as e.g. the proportional and the
concertina rules. We develop the properties of this tariff reform,
characterize the sources of the potential welfare gains from tariff reform,
use it to establish conditions under which some existing reforms are
locally optimal, provide geometric illustrations and compare welfare
effectiveness of reforms using numerical examples. Moreover, being a
general concept, we apply it to the issue of market access and examine its
implications. Overall, the paper’s contribution lies in presenting a
theoretical concept where the focus is upon the size of welfare gains
accruing from tariff reforms rather than simply with the direction of
welfare effects that has been the concern of the literature. JEL code: F15.
Keywords: Steepest ascent tariff reforms; piecemeal tariff policy; welfare;
market access; small open economy.
Keywords: Market access; tariff reform; consumption tax reform.; (follow links to similar papers)
JEL-Codes: G10; (follow links to similar papers)
42 pages, January 1, 2006
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