Abstract
Practical trade policy advice must usually recognize that trade taxes help to raise government revenue required for other fiscal purposes. In contrast, the theory of trade policy analysis typically uses the simplifying assumption that tariff revenue is ‘passively’ redistributed, so that a fall in revenue is offset by a fall in the lump sum transfer from the government to the private sector. The passive transfer assumption was perhaps an appropriate simplification in the economies of the Organisation for Economic Cooperation and Development (OECD) in the era of rapid growth, but it is clearly inappropriate to the present concern over public debt along with resistance to tax increases or cuts in the provision of public-sector goods.1 The passive transfer assumption was never appropriate for the governments of developing nations, which are typically dependent on tariff revenue.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Abe, K. (1992) ‘Tariff Reform in a Small Open Economy with Public Production’, International Economic Review, vol. 33, pp. 209–22.
Abe, K. (1995) ‘The Target Rates of Tariff and Tax Reform’, International Economic Review, vol. 36, pp. 875–86.
Anderson, J. E. (1994) ‘The Theory of Protection’, in D. Greenaway and L. A. Winters (eds), Surveys of International Trade (Oxford: Basil Blackwell).
Anderson, J. E. and W. Martin (1995) ‘The Welfare Analysis of Fiscal Policy: A Simple Unified Accounting’, mimeo, Boston College.
Anderson, J. E. and J. P. Neary (1992) ‘Trade Reform with Quotas, Partial Rent Retention and Tariffs’, Econometrica, vol. 60, pp. 57–76.
Anderson, J. E. and L. Young (1992) ‘Optimal Taxation and Debt in an Open Economy’, Journal of Public Economics, no. 47, pp. 21–51.
Ballard, C, J. Shoven and J. Whalley (1985) ‘General Equilibrium Computations of the Marginal Welfare Cost of Taxes in the United States’, American Economic Review, vol. 75, pp. 128–38.
Bertrand, T. J. and J. Vanek (1971) ‘The theory of Tariffs, Taxes and Subsidies: Some Aspects of the Second Best’, American Economic Review, vol. 61, pp. 925–31.
Bruno, M. (1972) ‘Market Distortions and Gradual Reform’, Review of Economic Studies, vol. 39, pp. 373–83.
Chenery, H. B., J. Lewis, J. de Melo and S. Robinson (1986) ‘Alternative Routes to Development’, in H. B. Chenery, S. Robinson and M. Syrquin (eds), Industrialization and Growth: a Comparative Study (London: Oxford University Press).
Devarajan, S., L. Squire and S. Suthiwart-Narueput (1995) ‘Reviving Project Appraisal at the World Bank’, World Bank Policy Research Working Paper, no. 1496.
Diamond, P. A. and J. Mirrlees (1971) ‘Optimal Taxation and Public Production’, American Economic Review, vol. 61, pp. 8–27 and 261–78.
Diewert, W E., A. H. Turunen-Red and A. D. Woodland (1989) ‘Productivity-and Pareto-Improving Changes in Taxes and Tariffs’, Review of Economic Studies, vol. 56, pp. 199–216.
Diewert, W. E., A. H. Turunen-Red and A. D. Woodland (1991) ‘Tariff Reform in a Small Open Economy with Domestic Distortions and Nontraded Goods’, International Economic Review, vol. 32, pp. 937–57.
Ethier, W J. (1995) Modern International Economics, 3rd edn (New York: Norton).
Falvey, R. (1994) ‘Revenue Enhancing Tariff Reform’, CREDIT Paper 94/5, University of Nottingham.
Foster, E. and H. Sonnenschein (1970) ‘Price Distortion and Economic Welfare’, Econometrica, vol. 38, pp. 281–97.
Grossman, G. and E. Helpman (1994) ‘Protection for Sale’, American Economic Review, vol. 84, pp. 833–50.
Hatta, T. (1977) ‘A Theory of Piecemeal Policy Recommendations’, Review of Economic Studies, vol. 44, pp. 1–21.
Hillman, A. (1989) The Political Economy of Protection (New York: Harwood Academic Press).
Lloyd, P. (1974) ‘A More General Theory of Price Distortions in Open Economies’, Journal of International Economics, vol. 4, pp. 365–86.
Lopez, R. and A. Panagariya (1992) ‘On the Theory of Piecemeal Tariff Reform: The Case of Pure Imported Intermediate Inputs’, American Economic Review, vol. 82, pp. 615–25.
Panagariya, A. (1992) ‘Input Tariffs, Duty Drawbacks and Tariff Reform’, Journal of International Economics, vol. 32, pp. 131–48.
Ramsey, F. (1927) ‘A Contribution to the Theory of Taxation’, Economic Journal, vol. 37, pp. 47–61.
Squire, L. (1989) ‘Project Evaluation in Theory and Practice’, in H. Chenery and T. N. Srinivasan (eds), Handbook of Development Economics, vol. II (Amsterdam: Elsevier).
Abe, K. (1992) ‘Tariff Reform in a Small Open Economy with Public Production’, International Economic Review, vol. 33, no. 1, pp. 209–22.
Ahmad, E. and N. Stern (1984) ‘The Theory of Reform and Indian Indirect Taxes’, Journal of Public Economics, vol. 25, no. 3, pp. 259–95.
Ahmad, E. and N. Stern (1991) The Theory and Practice of Tax Reform in Developing Countries (Cambridge: Cambridge University Press).
Diewert, W E., A. Turunen-Red and A. Woodland (1989) ‘Productivity and Pareto Improving Changes in Taxes and Tariffs’, Review of Economic Studies, vol. 56, pp. 199–216.
Dixit, A. and V. Norman (1980) Theory of International Trade (Cambridge: Cambridge University Press).
Hatta, T. (1977) ‘A Recommendation for a Better Tariff Structure’, Econometrica, vol. 45, pp. 1859–69.
Konishi, H. (1995) ‘A Pareto-Improving Commodity Tax Reform under a Smooth Nonlinear Income Tax’, Journal of Public Economics, vol. 56, pp. 413–46.
Lahiri, S. and P. Raimondos-Moller (1997) ‘On the Tying of Aid to Tariff Reform’, Journal of Development Economics, vol. 54, no. 2.
Turunen-Red, A. and A. Woodland (1993) ‘Partial Tariff and Quota Reform in a Small Open Economy’, mimeo, Department of Economics, University of Texas at Austin.
Woodland, A. (1985) ‘Recent Developments in the Theory of Tariff Reform’, mimeo, University of Sydney, Department of Econometrics.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Copyright information
© 1999 International Economic Association
About this paper
Cite this paper
Anderson, J.E., Turunen-Red, A. (1999). Trade Reform with a Government Budget Constraint. In: Piggott, J., Woodland, A. (eds) International Trade Policy and the Pacific Rim. International Economic Association Series. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-14543-0_9
Download citation
DOI: https://doi.org/10.1007/978-1-349-14543-0_9
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-14545-4
Online ISBN: 978-1-349-14543-0
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)