Abstract
In an endogenously growing small open economy with a capital good and a consumption good, we characterize the optimal combination of an import tariff and consumption taxes under the revenue neutrality constraint. Focusing on the case in which the economy imports the capital good, we obtain two main results. First, consumption of the capital good is distorted more than the consumption good at the optimum. Second, the optimal tariff rate is positive, implying that free trade is not optimal even for a small open economy with no market failure.
| Original language | English |
|---|---|
| Pages (from-to) | 504-517 |
| Number of pages | 14 |
| Journal | Journal of International Economics |
| Volume | 68 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - 2006 Mar |
| Externally published | Yes |
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Keywords
- Capital good
- Endogenous growth
- Optimal tariff and tax structure
- Revenue-neutral tariff and tax reform
- Tax base
ASJC Scopus subject areas
- Economics and Econometrics
- Finance
Cite this
Tariff and tax reform : Dynamic implications. / Naito, Takumi.
In: Journal of International Economics, Vol. 68, No. 2, 03.2006, p. 504-517.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Tariff and tax reform
T2 - Dynamic implications
AU - Naito, Takumi
PY - 2006/3
Y1 - 2006/3
N2 - In an endogenously growing small open economy with a capital good and a consumption good, we characterize the optimal combination of an import tariff and consumption taxes under the revenue neutrality constraint. Focusing on the case in which the economy imports the capital good, we obtain two main results. First, consumption of the capital good is distorted more than the consumption good at the optimum. Second, the optimal tariff rate is positive, implying that free trade is not optimal even for a small open economy with no market failure.
AB - In an endogenously growing small open economy with a capital good and a consumption good, we characterize the optimal combination of an import tariff and consumption taxes under the revenue neutrality constraint. Focusing on the case in which the economy imports the capital good, we obtain two main results. First, consumption of the capital good is distorted more than the consumption good at the optimum. Second, the optimal tariff rate is positive, implying that free trade is not optimal even for a small open economy with no market failure.
KW - Capital good
KW - Endogenous growth
KW - Optimal tariff and tax structure
KW - Revenue-neutral tariff and tax reform
KW - Tax base
UR - http://www.scopus.com/inward/record.url?scp=33644654337&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=33644654337&partnerID=8YFLogxK
U2 - 10.1016/j.jinteco.2005.04.002
DO - 10.1016/j.jinteco.2005.04.002
M3 - Article
AN - SCOPUS:33644654337
VL - 68
SP - 504
EP - 517
JO - Journal of International Economics
JF - Journal of International Economics
SN - 0022-1996
IS - 2
ER -