Trade and Tax Reforms in a Cash-in-Advance Economy
AbstractWe examine the effects of both tariff-only and coordinated trade-tax reforms on market access, government revenue, and welfare for a small monetary economy, under the assumption that a certain fraction of purchases of each good must be financed with cash held in advance. We show that if the cash requirement ratio in the exportable sector is greater than that in the importable, then, contrary to previous results, (i) a uniform radial reduction of tariffs has ambiguous effects on both welfare and market access, (ii) tariff and consumption tax reforms that leave consumer prices unchanged may be more efficient in improving market access and welfare than a reform that involves only tariffs, and (iii) export and production tax reforms that keep producer prices unchanged may be welfare deteriorating.
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Bibliographic InfoArticle provided by Southern Economic Association in its journal Southern Economic Journal.
Volume (Year): 77 (2011)
Issue (Month): 4 (April)
Other versions of this item:
- Theodore Palivos & Nikos Tsakiris, 2009. "Trade and Tax Reforms in a Cash-in-Advance Economy," University of Cyprus Working Papers in Economics 1-2009, University of Cyprus Department of Economics.
- Theodore Palivos & Nikos Tsakiris, 2010. "Trade and Tax Reforms in a Cash-in-Advance Economy," Discussion Paper Series 2010_07, Department of Economics, University of Macedonia, revised Apr 2010.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
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