The possibility of welfare gains with capital inflows in a small tariff-distorted economy (original) (raw)

The Possibility of Welfare Gains with Capital Inflows in a Small Tariff-Ridden Economy

1997

Capital inflows with full repatriation give rise to welfare improvement possibilities in a small tariff-distorted economy when imperfect competition and increasing returns are allowed for in one sector of a two-sector model. This is in contrast to the Brecher-Alejandro proposition that capital inflows with full repatriation are necessarily immiserizing for a small tariff-ridden economy. We find that welfare gains chances are greater (a) the higher the expenditure share of the capital-intensive differentiated good; (b) the lower the substitutability between brands; and (c) the lower the share of tariff revenue in national income.

The Growth and Welfare Consequences of Differential Tariffs

International Economic Review, 1993

This paper analyzes the impact of differential tariffs on consumption and investment in a specific factors model of a small open economy in which capital is accumulated over time. Particular attention is devoted to the welfare aspects, highlighting the cost of the intertemporal distortions produced by protective trade policies. Several specific welfare propositions are obtained. Fist, tariff protection is shown to create short-run beneftts but long-run costs in welfare. Secondly, the second-best policy for the two tariffs is characterized. Finally, several propositions summarizing the implications of our analysis for tariff reform are derived.

Welfare- and Revenue-Enhancing Tariff and Tax Reform under Imperfect Competition

Journal of Public Economic Theory, 2008

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.

Differential tariffs, growth, and welfare in a small open economy

Journal of Development Economics, 2000

This paper analyzes the effects of consumption and investment tarrifs on growth and welfare. With endogenous laber supply, consumption tariffs are not growth-neutral. Instead, an increase in either tariff reduces both the short-run growth rates of key economic variables such as GDP, consumption, and foreign debt, and their common long-run equilibrium growth rate. Numerical simulations suggest that the investment tariff has a more adverse effect on growth rates and welfare than does a comparable consumption tariff. Accordingly, a revenue-neutral substitution of a consumption tariff for an investment tariff is both growth-enhancing and welfare-improving. The second-best and first-best optimal tariffs are characterized and shown to involve the heavy subsidization of investment. q S.J. Turnovsky . 1 Tel.:q1-206-685-8028; fax: q1-206-685-7477. 0304-3878r00r$ -see front matter q 2000 Elsevier Science B.V. All rights reserved. Ž . PII: S 0 3 0 4 -3 8 7 8 0 0 0 0 0 8 7 -0 ( ) T. Osang, S.

Welfare-maximizing and revenue-maximizing tariffs with a few domestic firms

Canadian Journal of Economics/Revue Canadienne d`Economique, 2002

In this paper we compare the orthodox optimal tariff formula with the appropriate welfare-maximizing tariff when there are a few producing or importing firms. The welfaremaximizing tariff can be very low, voire negative in some cases, while in others it can even exceed the maximum-revenue tariff. The relationship between the welfare-maximizing tariff and the number of firms need not be monotonically increasing, because the tariff is not strictly used to internalize terms of trade externality. It is also used to manipulate cost asymmetries between producing and importing firms. Welfare-maximizing specific tariffs are never worse than their ad valorem counterparts. JEL Classification F13, L13

IMPORT TARIFFS, QUALITY INVESTMENT AND WELFARE

Economics Working Papers, 2005

Abstract: In this paper we study incentives for a government to impose a discriminatory or uniform import tariff on its low and high quality imports. In comparison to free trade both tariffs decrease total welfare. In response to any tariff, firms decrease quality investment and total output ...

Quality Investment and Welfare in the presence of Discriminatory and Uniform Import Tariffs

2006

In this paper we study incentives for a government to impose a discriminatory or uniform import tariff on its low and high quality imports. In comparison to free trade both tariffs decrease total welfare. In response to any tariff, firms decrease quality investment and total output sold declines. The degree of product differentiation under both the tariffs increases. Consumer surplus declines by a greater amount than the increase in revenues under an import tariff. While the uniform tariff works to the advantage of the high quality firm, the discriminative tariff works to the advantage of the low quality firm. Total welfare, though lower than under free trade, is greater under a uniform than under a discriminatory tariff.

International Factor Mobility, Nontraded Goods and Tariff Reform

The Japanese Economic Review, 1995

Within models of traded and nontraded goods, that ignore international factor mobility, the literature on tariff reform has established sufficient conditions under which a policy that reduces (increases) the highest (lowest) tariff to the level of the second highest (lowest) rate, or a policy that moves proportionally all tariffs to a given number improves welfare. The present paper generalizes previous studies by introducing perfect international capital mobility. It demonstrates that if all goods are normal in consumption and the nontraded good markets are locally Walras stable, then a reform policy that reduces (increases) the highest (lowest) tariff to the level of the next highest (Lowest) rate improves welfare if (i) the good with the highest (lowest) tariff rate is a net substitute to all other traded goods, and (ii) the nontraded goods are net substitutes to all other goods. Second, a policy reform that moves all tariffs to a given number is always welfare improving. * We acknowledge constructive comments by a referee of the journal, D. Heffley, and S. Miller. The usual caveat applies.-274-0 Japan Association of Economics and Econometrics 1995.