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A Tariff-Tax Reform under Oligopoly and Free Entry

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Author Info

  • Kenji Fujiwara

    ()
    (School of Economics, Kwansei Gakuin University)

  • Ryoma Kitamura

    (Graduate School of Economics, Kwansei Gakuin University)

Abstract

Constructing a model of oligopoly with free entry, this paper examines the effects of a tariff reduction accompanied with a unit of consumption tax increase on welfare, government revenue, and market access. We show that the suggested policy reform reduces welfare while enhancing government revenue and market access by inducing further excess entry. Some implications of this finding are discussed in comparison with the case with a fixed number of firms, which involves a welfare loss and an ambiguous effect on government revenue and market access.

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File URL: http://192.218.163.163/RePEc/pdf/kgdp88.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 88.

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Length: 15 pages
Date of creation: Apr 2012
Date of revision: Apr 2012
Handle: RePEc:kgu:wpaper:88

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Keywords: tariff-tax reform; oligopoly; free entry; welfare; government revenue; market access.;

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  1. Michael O. Moore & Maurizio Zanardi, 2010. "Does Trade Liberalization Affect the Composition of Government Spending in Developing Nations?," Working Papers ECARES 2010_013, ULB -- Universite Libre de Bruxelles.
  2. Kreickemeier, Udo & Raimondos-Møller, Pascalis, 2006. "Tariff-Tax Reforms and Market Access," CEPR Discussion Papers 5889, C.E.P.R. Discussion Papers.
  3. Takumi Naito & Kenzo Abe, 2008. "Welfare- and Revenue-Enhancing Tariff and Tax Reform under Imperfect Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(6), pages 1085-1094, December.
  4. Michael Keen & Johanna Elisabeth Ligthart, 1999. "Coordinating Tariff Reduction and Domestic Tax Reform," IMF Working Papers 99/93, International Monetary Fund.
  5. 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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