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Domestic and Trade Tax Reforms in the Presence of a Public Good and Different Neutrality Conditions


  • Michael S. Michael
  • Sajal Lahiri
  • Panos Hatzipanayotou


This paper develops a perfectly-competitive general-equilibrium model of a small open economy with production of private traded goods and of a public good which is financed by revenues from trade and domestic taxes. Within this framework we consider the effects on public good provision and on welfare of the following tax reforms: (i) a producer-price-neutral reduction in export taxes and a corresponding increase in production taxes, (ii) a consumer-price-neutral reduction in tariffs and a corresponding increase in consumption taxes, and (iii) a partial tax-revenue-neutral reform in trade and domestic taxes.

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  • Michael S. Michael & Sajal Lahiri & Panos Hatzipanayotou, 2011. "Domestic and Trade Tax Reforms in the Presence of a Public Good and Different Neutrality Conditions," University of Cyprus Working Papers in Economics 04-2011, University of Cyprus Department of Economics.
  • Handle: RePEc:ucy:cypeua:04-2011

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    Indirect tax reforms; Government tax revenue; Public good; Welfare;

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