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Welfare‐ and Revenue‐Enhancing Tariff and Tax Reform under Imperfect Competition
Author(s) -
NAITO TAKUMI,
ABE KENZO
Publication year - 2008
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/j.1467-9779.2008.00397.x
Subject(s) - tariff , imperfect competition , economics , revenue , consumption (sociology) , welfare , government revenue , consumption tax , competition (biology) , tax reform , microeconomics , government (linguistics) , international economics , tax revenue , public economics , indirect tax , monetary economics , market economy , finance , ecology , social science , linguistics , philosophy , sociology , biology
We examine welfare and revenue effects of tariff and tax reform in a country importing final and intermediate goods, both of which are produced under imperfect competition. We consider two reform strategies. First, lower the sum of a consumption tax and a tariff on the intermediate good, and leave the sum of the consumption tax and a tariff on the final good unchanged. Second, lower the former and change the latter to leave government revenue unchanged. We specify conditions under which each reform strategy raises welfare without decreasing government revenue.