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Revenue-Constrained Combination of an Optimal Tariff and Duty Drawback

Author

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  • Tatsuo Hatta

    (Asian Growth Research Institute, 11-4 Otemachi, Kokurakita, Kitakyushu 803-0814, Japan)

Abstract

A duty drawback is an export subsidy determined as a percentage of the tariffs paid on the imported inputs used in its production. This paper examines the revenue-constrained optimal tariff structure in a small open economy including a duty drawback as a trade policy tool. This paper has two main aims. First, we show that the revenue-constrained optimal combination of tariff and duty drawback for a given revenue level is not unique. Second, we show that if the optimal import tariff rates are all positive when the duty drawback rate is zero, then the optimal import tariff rates are always positive when the duty drawback is positive.

Suggested Citation

  • Tatsuo Hatta, 2018. "Revenue-Constrained Combination of an Optimal Tariff and Duty Drawback," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 13(1), pages 52-67, March.
    • Handle: RePEc:fec:journl:v:13:y:2018:i:1:p:52-67
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0005-1
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    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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