Growth, revenue, and welfare effects of tariff and tax reform: Win-win-win strategies

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We examine growth, revenue, and welfare effects of tariff and tax reform with a two-good, two-factor endogenous growth model. Learning-by-doing and intersectoral knowledge spillovers contribute to endogenous growth consistent with incomplete specialization. We obtain two main results. First, trade liberalization raises (or lowers) the growth rate if and only if the import sector is more effective-labor-intensive (or capital-intensive). Second, we can attain growth, revenue, and welfare gains by combining consumer-price-neutral tariff and tax reform for growth enhancement with an additional rise in the consumption tax on the less distorted good.

Original languageEnglish
Pages (from-to)1263-1280
Number of pages18
JournalJournal of Public Economics
Issue number6-7
Publication statusPublished - 2006 Aug
Externally publishedYes



  • Endogenous growth
  • Intersectoral knowledge spillovers
  • Learning-by-doing
  • Stolper-Samuelson theorem
  • Tariff and tax reform

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance

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