Tariff Reform in a Small Open Multi-Household Economy with Domestic Distortions and Nontraded Goods

We examine tariff reforms in the context of a small open economy and simultaneously deal with three extensions of the current literature: nonremovable domestic tax distortions, nontraded goods, and many households. Using the new concepts of a constant utility tax adjusted balance of trade function a...

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Bibliographic Details
Published in:International economic review (Philadelphia) 1991-11, Vol.32 (4), p.937-957
Main Authors: Diewert, W. E., Turunen-Red, A. H., Woodland, A. D.
Format: Article
Language:English
Subjects:
Balance of trade
Commodities
Economic impact
Economic models
Economic theory
Households
Income redistribution
Open economies
Pareto improvement
Pareto optimum
Reforms
Studies
Tariff reform
Tariff reforms
Tariffs
Taxation
Taxes
Woodlands
World prices
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Summary:We examine tariff reforms in the context of a small open economy and simultaneously deal with three extensions of the current literature: nonremovable domestic tax distortions, nontraded goods, and many households. Using the new concepts of a constant utility tax adjusted balance of trade function and a constant utility productivity improvement in tariffs, necessary and sufficient conditions for the existence of strict Pareto improving tariff and transfer reforms are established. We also consider directional tariff reforms such as movements towards the world price vector, proportional reductions, and reductions of extreme tariffs. Also discussed is the role of normality of household preferences.
ISSN:0020-6598
1468-2354
DOI:10.2307/2527044