IDEAS home Printed from https://ideas.repec.org/a/eee/inecon/v98y2016icp150-159.html
   My bibliography  Save this article

Sufficient statistics for tariff reform when revenue matters

Author

Listed:
  • Anderson, James E.
  • Neary, J. Peter

Abstract

What kinds of tariff reform are likely to raise welfare in situations where tariff revenue is important? General conditions for welfare to rise without reducing tariff revenue are opaque. We show that they can be greatly simplified using a small number of sufficient statistics, primarily the generalized mean and variance of tariffs. We present sufficient conditions for a class of linear tariff reform rules that guarantee higher welfare without a loss in revenue. The rules consist of convex combinations of (i) trade-weighted-average-tariff-preserving cuts in dispersion; and (ii) uniform tariff cuts that preserve domestic relative prices among tariff-ridden goods.

Suggested Citation

  • Anderson, James E. & Neary, J. Peter, 2016. "Sufficient statistics for tariff reform when revenue matters," Journal of International Economics, Elsevier, vol. 98(C), pages 150-159.
    • Handle: RePEc:eee:inecon:v:98:y:2016:i:c:p:150-159
    DOI: 10.1016/j.jinteco.2015.10.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0022199615001488
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jinteco.2015.10.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, vol. 60(1), pages 57-76, January.
    2. Tatsuo Hatta, 1977. "A Theory of Piecemeal Policy Recommendations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(1), pages 1-21.
    3. Michael Bruno, 1972. "Market Distortions and Gradual Reform," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 39(3), pages 373-383.
    4. 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.
    5. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
    6. Anderson, James E. & Neary, J. Peter, 2007. "Welfare versus market access: The implications of tariff structure for tariff reform," Journal of International Economics, Elsevier, vol. 71(1), pages 187-205, March.
    7. Raimondos-Møller, Pascalis & Woodland, Alan D., 2015. "Market access and welfare: Is there a conflict?," Economics Letters, Elsevier, vol. 126(C), pages 163-166.
    8. 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.
    9. John Piggott & Alan Woodland (ed.), 1999. "International Trade Policy and the Pacific Rim," International Economic Association Series, Palgrave Macmillan, number 978-1-349-14543-0, December.
    10. Abe, Kenzo, 1992. "Tariff Reform in a Small Open Economy with Public Production," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(1), pages 209-222, February.
    11. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-278, June.
    12. Foster, Edward & Sonnenschein, Hugo, 1970. "Price Distortion and Economic Welfare," Econometrica, Econometric Society, vol. 38(2), pages 281-297, March.
    13. Can Erbil, 2004. "Trade Taxes Are Expensive," International Trade 0409002, University Library of Munich, Germany.
    14. Keen, Michael & Ligthart, Jenny E., 2002. "Coordinating tariff reduction and domestic tax reform," Journal of International Economics, Elsevier, vol. 56(2), pages 489-507, March.
    15. Mr. George T. Abed, 1998. "Trade Liberalization and Tax Reform in the Southern Mediterranean Region," IMF Working Papers 1998/049, International Monetary Fund.
    16. Rod Falvey, 1994. "Revenue enhancing tariff reform," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(1), pages 175-190, March.
    17. Kreickemeier, Udo & Raimondos-Møller, Pascalis, 2008. "Tari[ff]-tax reforms and market access," Journal of Development Economics, Elsevier, vol. 87(1), pages 85-91, August.
    18. Baunsgaard, Thomas & Keen, Michael, 2010. "Tax revenue and (or?) trade liberalization," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 563-577, October.
    19. James E. Anderson & J. Peter Neary, 2005. "Measuring the Restrictiveness of International Trade Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012200, December.
    20. A. B. Atkinson & N. H. Stern, 1974. "Pigou, Taxation and Public Goods," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(1), pages 119-128.
    21. Tatsuo Hatta & Yoshitomo Ogawa, 2007. "Optimal Tariffs under a Revenue Constraint," Review of International Economics, Wiley Blackwell, vol. 15(3), pages 560-573, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Raimondos, Pascalis & Woodland, Alan, 2018. "Reciprocity in trade negotiations and welfare," Journal of International Economics, Elsevier, vol. 111(C), pages 134-142.
    2. Nikos Tsakiris & Panos Hatzipanayotou & Michael S. Michael, 2019. "Border tax adjustments and tariff‐tax reforms with consumption pollution," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 21(6), pages 1107-1125, December.
    3. Lippi, Francesco & Alvarez, Fernando & Ferrara, Andrea & Gautier, Erwan & Le Bihan, Hervé, 2021. "Empirical Investigation of a Sufficient Statistic for Monetary Shocks," CEPR Discussion Papers 16626, C.E.P.R. Discussion Papers.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. James E. Anderson & J. Peter Neary, 2013. "Revenue Tariff Reform," NBER Working Papers 19752, National Bureau of Economic Research, Inc.
    2. Kreickemeier, Udo & Raimondos-Møller, Pascalis, 2008. "Tari[ff]-tax reforms and market access," Journal of Development Economics, Elsevier, vol. 87(1), pages 85-91, August.
    3. Keen, Michael, 2008. "VAT, tariffs, and withholding: Border taxes and informality in developing countries," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 1892-1906, October.
    4. Knud Munk, 2008. "Tax-tariff reform with costs of tax administration," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(6), pages 647-667, December.
    5. Yoshitomo Ogawa & Nobuhiro Hosoe, 2020. "Optimal indirect tax design in an open economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(5), pages 1081-1107, October.
    6. Amèvi Rocard Kouwoaye, 2019. "Trade tax reforms and poverty in developing countries: Why do some countries benefit and others lose?," WIDER Working Paper Series wp-2019-66, World Institute for Development Economic Research (UNU-WIDER).
    7. Theodore Palivos & Nikos Tsakiris, 2011. "Trade and Tax Reforms in a Cash‐in‐Advance Economy," Southern Economic Journal, John Wiley & Sons, vol. 77(4), pages 1014-1032, April.
    8. James E. Anderson & Arja Turunen-Red, 1999. "Trade Reform with a Government Budget Constraint," International Economic Association Series, in: John Piggott & Alan Woodland (ed.), International Trade Policy and the Pacific Rim, chapter 9, pages 217-244, Palgrave Macmillan.
    9. Pascalis Raimondos-Møller & Alan Woodland, 2014. "Steepest ascent tariff reform," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 55(1), pages 69-99, January.
    10. Jenny Ligthart & Gerard C. van der Meijden, 2010. "Coordinated Tax-Tariff Reforms, Informality, and Welfare Distribution," CESifo Working Paper Series 3107, CESifo.
    11. Panos Hatzipanayotou & Sajal Lahiri & Michael Michael, 2011. "Trade and domestic tax reforms in the presence of a public good and different neutrality conditions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(3), pages 273-290, June.
    12. Yoshitomo Ogawa & Nobuhiro Hosoe, 2018. "Optimal Indirect Tax Design for a Developing Country," GRIPS Discussion Papers 18-06, National Graduate Institute for Policy Studies.
    13. Michael Keen, 2007. "VAT attacks!," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(4), pages 365-381, August.
    14. 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.
    15. Haibara Takumi, 2017. "Indirect Tax Reform in Developing Countries: A Consumption-Neutral Approach," Journal of Globalization and Development, De Gruyter, vol. 8(1), pages 1-11, June.
    16. Jorge Martinez-Vazquez & Violeta Vulovic & Yongzheng Liu, 2011. "Direct versus Indirect Taxation: Trends, Theory, and Economic Significance," Chapters, in: Emilio Albi & Jorge Martinez-Vazquez (ed.), The Elgar Guide to Tax Systems, chapter 2, Edward Elgar Publishing.
    17. Julia Cage & Lucie Gadenne, 2014. "Tax Revenues, Development, and the Fiscal Cost of Trade Liberalization, 1792-2006," Sciences Po publications info:hdl:2441/4icc4hr7684, Sciences Po.
    18. M. Shahe Emran & Joseph E. Stiglitz, 2004. "Price-neutral Tax Reform With an Informal Economy," Public Economics 0407010, University Library of Munich, Germany.
    19. repec:hal:spmain:info:hdl:2441/4icc4hr7684k8f6u7csmfuve2 is not listed on IDEAS
    20. Michael S. Michael & Sajal Lahiri & Panos Hatzipanayotou, 2008. "Integrated Reforms of Indirect Taxes in the Presence of Pollution," CESifo Working Paper Series 2276, CESifo.
    21. Chi-Chur Chao & Eden S. H. Yu, 2015. "Environmental Impacts of Tariff and Tax Reforms Under Origin and Destination Principles," Pacific Economic Review, Wiley Blackwell, vol. 20(2), pages 310-322, May.

    More about this item

    Keywords

    Trade policy reform; Generalized mean and variance of tariffs; Tariff revenue; Piecemeal policy reform;
    All these keywords.

    JEL classification:

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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:inecon:v:98:y:2016:i:c:p:150-159. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505552 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.