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The Revenue Maximising Tariff Rate: A Theoretical Model Applied to 1890s Victoria

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  • William Coleman

Abstract

There is a certain rate of tariff which will maximise the tariff’s revenue. Can theory give any indication as to the actual magnitude of the tariff? The paper develops a simple expression for the revenue maximising tariff rate in terms of the import share, the elasticity of supply of the good, and the elasticity of demand for the good. The model is then applied to an historical episode: the substantial reduction in tariff rates 1895 that were implemented in a previously highly protectionist Victoria by a government hungry for revenue. The model is found to be consonant with the facts of that episode.

Suggested Citation

  • William Coleman, 2020. "The Revenue Maximising Tariff Rate: A Theoretical Model Applied to 1890s Victoria," CEH Discussion Papers 07, Centre for Economic History, Research School of Economics, Australian National University.
    • Handle: RePEc:auu:hpaper:089
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    File URL: https://cbe.anu.edu.au/researchpapers/CEH/WP202007.pdf
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    References listed on IDEAS

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    1. Peter Lloyd, 2017. "The First 100 Years of Tariffs in Australia: the Colonies," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 57(3), pages 316-344, November.
    2. Tower, Edward, 1977. "Ranking the optimum tariff and the maximum revenue tariff," Journal of International Economics, Elsevier, vol. 7(1), pages 73-79, February.
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    Cited by:

    1. William Coleman, 2020. "The Impact of the ‘Braddon Blot’ on Australia’s Tariff Structure, 1901-1910: A Leviathanic Analysis," CEH Discussion Papers 10, Centre for Economic History, Research School of Economics, Australian National University.

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