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Optimal tariffs, optimal taxes and economic development

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Author Info

  • Michael Loewy

Abstract

Cross-section and time-series data suggest that nations substitute income taxes for tariffs as they develop. This paper confronts the data within the context of a two-country open-economy endogenous growth model in which public expenditure is financed by an optimal tariff and income tax. When the latter is subject to administrative costs, the model predicts that the government will optimally substitute the income tax for the tariff as output rises along the transition. The model is calibrated and a simulation yields time paths for the shares of total government revenue derived from the tariff and the income tax that are consistent with the data.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/0963819042000300618
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal The Journal of International Trade & Economic Development.

Volume (Year): 13 (2001)
Issue (Month): 4 ()
Pages: 461-486

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Handle: RePEc:taf:jitecd:v:13:y:2001:i:4:p:461-486

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Related research

Keywords: Optimal tariffs; optimal taxes; growth;

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Cited by:
  1. Manoj Atolia, 2003. "Public Investment, Tax Evasion and Welfare Effects of a Tariff Reform," Working Papers wp2003_10_01, Department of Economics, Florida State University, revised Oct 2008.
  2. Zhang, Yan, 2008. "Tariff and Equilibrium Indeterminacy--(II)," MPRA Paper 10043, University Library of Munich, Germany.
  3. Zhang, Yan, 2008. "Tariff and Equilibrium Indeterminacy," MPRA Paper 11370, University Library of Munich, Germany.

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