Revenue-neutral environmental tariff reform, growth, and welfare

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Abstract

This paper analyzes the growth and welfare effects of revenue-neutral tariff reform in a small open endogenous growth model with environmental externalities. As is the case in countries that depend primarily on imported energy, the employment of a foreign intermediate good causes negative environmental externalities in production. This paper shows that substituting a tariff on the foreign intermediate good for a tariff on the foreign consumption good in a revenue-neutral way raises the growth rate and the welfare, if the environmental externality is sufficiently strong and if the elasticity of substitution between inputs lies within a certain range.

Original languageEnglish
Pages (from-to)985-996
Number of pages12
JournalReview of International Economics
Volume13
Issue number5
DOIs
Publication statusPublished - 2005 Nov
Externally publishedYes

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ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development

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