This paper examines, within an imperfectly competitive environment with public goods, the welfare effects of three popular indirect tax reforms: i) a tariff cut combined with an equal increase in the consumption tax, ii) a tariff cut combined with an increase in the consumption tax that leaves consumer price unchanged, and iii) an export tax reduction combined with an equal increase in the production tax. It is shown that the welfare effects of these reforms are ambiguous, in that they depend on the strength of the consumers’ valuation of the public goods. This result contrasts existing results in the literature that ignores public goods provision.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.