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Energy Tariffs, Production, and Income in a Small Open Economy

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  • Henry Thompson

Abstract

A tariff on imported energy in a small open economy alters production, redistributes income, and generates tariff revenue. The present paper includes tariff revenue in a general equilibrium economy producing two traded goods with imported energy and domestic capital and labor. An energy tariff reduces energy intensive output and domestic factor income but payment to one domestic factor may rise as might the other output. Tariff revenue, not included in the related theoretical literature, is shown to be concave in the tariff. A simulation illustrates these general equilibrium properties including the revenue maximizing tariff.

Suggested Citation

  • Henry Thompson, 2013. "Energy Tariffs, Production, and Income in a Small Open Economy," Auburn Economics Working Paper Series auwp2013-11, Department of Economics, Auburn University.
    • Handle: RePEc:abn:wpaper:auwp2013-11
    as

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    File URL: https://cla.auburn.edu/econwp/Archives/2013/2013-11.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Energy Tariffs; Tariff Revenue; General Equilibrium;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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