Welfare effects of unilateral changes in tariffs: the case of Motor vehicles and parts in Australia
AbstractWe derive formulas for the optimal tariff rate in four theoretical models. We start with a model in which industries are competitive and then successively allow for: monopoly pricing by export industries; revenue-replacement costs; and cold-shower effects. The theoretical formulas accurately explain results from MONASH, a detailed CGE model. A critical parameter in determining the optimal tariff is the export-demand elasticity. Modellers are often reluctant to adopt empirically justifiable values for export-demand elasticities because such values generate embarrassingly large optimal tariff rates. A way out of this dilemma is the adoption of a non-linear cold-shower specification.
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Bibliographic InfoPaper provided by Monash University, Centre of Policy Studies/IMPACT Centre in its series Centre of Policy Studies/IMPACT Centre Working Papers with number g-177.
Date of creation: Sep 2008
Date of revision:
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optimal tariff; export-demand elasticities; cold-shower effect; monopoly pricing; revenue-replacement costs;
Find related papers by JEL classification:
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-14 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Xiao-Guang Zhang, 2008. "The Armington General Equilibrium Model: Properties, Implications and Alternatives," Staff Working Papers 0804, Productivity Commission, Government of Australia.
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