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Revenue‐Neutral Environmental Tariff Reform, Growth, and Welfare
Author(s) -
Naito Takumi
Publication year - 2005
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2005.00549.x
Subject(s) - tariff , economics , externality , revenue , welfare , elasticity of substitution , international economics , consumption (sociology) , endogenous growth theory , small open economy , production (economics) , microeconomics , monetary economics , market economy , exchange rate , finance , social science , sociology , human capital
This paper analyzes the growth and welfare effects of revenue‐neutral tariff reform in a small open endogenous growth model with environmental externalities. As is the case in countries that depend primarily on imported energy, the employment of a foreign intermediate good causes negative environmental externalities in production. This paper shows that substituting a tariff on the foreign intermediate good for a tariff on the foreign consumption good in a revenue‐neutral way raises the growth rate and the welfare, if the environmental externality is sufficiently strong and if the elasticity of substitution between inputs lies within a certain range.