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Revenue-Constrained Combination of an Optimal Tariff and Duty Drawback

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  • Hatta, Tatsuo

Abstract

A duty drawback is an export subsidy determined as a percentage of the tariffs paid on the imported inputs used in its production. This paper examines the revenue-constrained optimal tariff structure in a small open economy including a duty drawback as a trade policy tool. This paper has two main aims. First, we show that the revenue-constrained optimal combination of tariff and duty drawback for a given revenue level is not unique. Second, we show that if the optimal import tariff rates are all positive when the duty drawback rate is zero, then the optimal import tariff rates are always positive when the duty drawback is positive.

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  • Hatta, Tatsuo, 2015. "Revenue-Constrained Combination of an Optimal Tariff and Duty Drawback," AGI Working Paper Series 2015-19, Asian Growth Research Institute.
    • Handle: RePEc:agi:wpaper:00000087
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    References listed on IDEAS

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    1. J. Peter Neary, 1998. "Pitfalls in the Theory of International Trade Policy: Concertina Reforms of Tariffs, and Subsidies to High‐Technology Industries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 187-206, March.
    2. Tatsuo Hatta & Yoshitomo Ogawa, 2007. "Optimal Tariffs under a Revenue Constraint," Review of International Economics, Wiley Blackwell, vol. 15(3), pages 560-573, August.
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    More about this item

    Keywords

    Revenue-Constrained Optimal Tariff; Duty Drawback; Export Subsidy; Uniformity;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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