Seminar Papers, Institute for International Economic Studies, Stockholm University
James E. Anderson
Revenue Neutral Trade Reform with Many Households, Quotas and Tariffs
Abstract: Government budget balance forces the endogenous use of
distortionary tax instruments when an exogenous reform is implemented. The
aggregate efficiency of such reforms is based on comparisons of simple
summary measures of the Marginal Cost of Funds of the various tariff or
quota changes with the Marginal Cost of Funds of the alternative taxes, or
of the Marginal Benefit of Government supplied goods. The aggregate
efficiency of tariff liberalization is dubious, while quota liberalization
is more likely to be efficient. Social welfare rises with aggregate
efficiency unless distribution effects are perverse. Plausible sufficient
conditions for non-perverse distributional effects are provided. The
results frame a diagnostic method for sensitivity analysis in evaluations
of trade and tax policies.
Keywords: aggregate efficiency; tariff liberalization; quota liberalization; Social welfare; non-perverse distributional effects; (follow links to similar papers)
JEL-Codes: F13; H21; (follow links to similar papers)
35 pages, October 31, 1997
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- This paper is forthcoming as:
Anderson, James E., 'Revenue Neutral Trade Reform with Many Households, Quotas and Tariffs', Review of International Economics.
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