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The Trade and Welfare Consequences of U.S. Export-Enhancing Tax Provisions

Author

Listed:
  • Donald J. Rousslang

    (International Monetary Fund)

  • Stephen P. Tokarick

    (International Monetary Fund)

Abstract

The U.S. tax code contains two provisions that encourage exports by reducing the U.S. corporate income tax on export profits. In this paper we use an applied general equilibrium model of the U.S. economy to estimate the trade and welfare consequences of eliminating these tax provisions. We find that the provisions ameliorate the trade-discouraging effects of U.S. tariffs, but that they also adversely affect the U.S. terms of trade to such an extent that eliminating the provisions is likely to improve U.S. domestic welfare. We also find that a tariff reduction that replicates the trade effects of removing the tax provisions would interact differently with other distortions in the model and would have different effects on welfare.

Suggested Citation

  • Donald J. Rousslang & Stephen P. Tokarick, 1994. "The Trade and Welfare Consequences of U.S. Export-Enhancing Tax Provisions," IMF Staff Papers, Palgrave Macmillan, vol. 41(4), pages 675-683, December.
  • Handle: RePEc:pal:imfstp:v:41:y:1994:i:4:p:675-683
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    Cited by:

    1. Mihir A. Desai & James R. Hines, Jr., 2001. "The Uneasy Marriage of Export Incentives and the Income Tax," NBER Chapters, in: Tax Policy and the Economy, Volume 15, pages 41-94, National Bureau of Economic Research, Inc.
    2. Mihir A. Desai & James R. Hines Jr., 2001. "Exchange Rates and Tax-Based Export Promotion," NBER Working Papers 8121, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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