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Tariff-Tax Reforms and Market Access

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  • Kreickemeier, Udo
  • Raimondos-Møller, Pascalis

Abstract

Reducing tariffs and increasing consumption taxes is a standard IMF advice to countries that want to open up their economy without hurting government finances. Indeed, theoretical analysis of such a tariff-tax reform shows an unambiguous increase in welfare and government revenues. The present paper examines whether the country that implements such a reform ends up opening up its markets to international trade, i.e. whether its market access improves. It is shown that this is not necessarily so. We also show that, comparing to the reform of only tariffs, the tariff-tax reform is a less efficient proposal to follow both as far as it concerns market access and welfare.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5889.

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Date of creation: Oct 2006
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Handle: RePEc:cpr:ceprdp:5889

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Keywords: consumption tax reform; market access; tariff reform;

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References

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  1. Michael Keen & Johanna Elisabeth Ligthart, 1999. "Coordinating Tariff Reduction and Domestic Tax Reform," IMF Working Papers 99/93, International Monetary Fund.
  2. Hatta, Tatsuo, 1977. "A Theory of Piecemeal Policy Recommendations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 44(1), pages 1-21, February.
  3. Emran, M. Shahe & Stiglitz, Joseph E., 2005. "On selective indirect tax reform in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 599-623, April.
  4. James E. Anderson & J. Peter Neary, 2004. "Welfare versus Market Access: The Implications of Tariff Structure for Tariff Reform," Boston College Working Papers in Economics 601, Boston College Department of Economics.
  5. Ju, Jiandong & Krishna, Kala, 2000. "Welfare and market access effects of piecemeal tariff reform," Journal of International Economics, Elsevier, vol. 51(2), pages 305-316, August.
  6. Hatta, Tatsuo, 1977. "A Recommendation for a Better Tariff Structure," Econometrica, Econometric Society, Econometric Society, vol. 45(8), pages 1859-69, November.
  7. Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, Econometric Society, vol. 60(1), pages 57-76, January.
  8. Raimondos-Møller, Pascalis & Woodland, Alan D, 2006. "Steepest Ascent Tariff Reforms," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5782, C.E.P.R. Discussion Papers.
  9. Diewert, W E & Turunen-Red, A H & Woodland, A D, 1991. "Tariff Reform in a Small Open Multi-household Economy with Domestic Distortions and Nontraded Goods," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(4), pages 937-57, November.
  10. Diewert, W E & Turunen-Red, A H & Woodland, A D, 1989. "Productivity- and Pareto-Improving Changes in Taxes and Tariffs," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 56(2), pages 199-215, April.
  11. Lopez, Ramon & Panagariya, Arvind, 1992. "On the Theory of Piecemeal Tariff Reform: The Case of Pure Imported Intermediate Inputs," American Economic Review, American Economic Association, vol. 82(3), pages 615-25, June.
  12. Rod Falvey, 1994. "Revenue enhancing tariff reform," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 130(1), pages 175-190, March.
  13. Fukushima, Takashi, 1979. "Tariff Structure, Nontraded Goods and Theory of Piecemeal Policy Recommendations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(2), pages 427-35, June.
  14. Hatzipanayotou, Panos & Michael, Michael S. & Miller, Stephen M., 1994. "Win-win indirect tax reform : A modest proposal," Economics Letters, Elsevier, vol. 44(1-2), pages 147-151.
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Citations

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Cited by:
  1. Ligthart, J.E. & Meijden, G.C. van der, 2010. "Coordinated Tax-Tariff Reforms, Informality, and Welfare Distribution," Discussion Paper, Tilburg University, Center for Economic Research 2010-61, Tilburg University, Center for Economic Research.
  2. Kenji Fujiwara, 2013. "A Win–Win–Win Tariff–Tax Reform under Imperfect Competition," Review of International Economics, Wiley Blackwell, vol. 21(5), pages 857-867, November.
  3. Broll, Udo & Kemnitz, Alexander & Mukherjee, Vivekananda, 2009. "Globalization and a welfare program for the marginalized," Dresden Discussion Paper Series in Economics 05/09, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  4. Juha Tervala & Giovanni Ganelli, 2012. "Tariff-Tax Reforms in Large Economies," IMF Working Papers 12/139, International Monetary Fund.
  5. Kenji Fujiwara & Ryoma Kitamura, 2012. "A Tariff-Tax Reform under Oligopoly and Free Entry," Discussion Paper Series, School of Economics, Kwansei Gakuin University 88, School of Economics, Kwansei Gakuin University, revised Apr 2012.
  6. Ligthart, J.E. & Meijden, G.C. van der, 2011. "The Dynamics of Revenue-Neutral Trade Liberalization," Discussion Paper, Tilburg University, Center for Economic Research 2011-142, Tilburg University, Center for Economic Research.
  7. Michael Michael & Panos Hatzipanayotou, 2013. "Pollution and reforms of domestic and trade taxes towards uniformity," International Tax and Public Finance, Springer, Springer, vol. 20(5), pages 753-768, October.

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