A Tariff-Tax Reform under Oligopoly and Free Entry
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.
|Date of creation:||Apr 2012|
|Date of revision:||Apr 2012|
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- Kotaro Suzumura & Kazuharu Kiyono, 1987. "Entry Barriers and Economic Welfare," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 157-167.
- Kreickemeier, Udo & Raimondos-Møller, Pascalis, 2006.
"Tariff-Tax Reforms and Market Access,"
06-2006, Copenhagen Business School, Department of Economics.
- 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.
- 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.
- 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.
- 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.
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