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Should Tariff Reductions be Announced? An Intertemporal Computable General Equilibrium Analysis

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  • Michael Malakellis

Abstract

In this paper the macro and structural implications of three alternative tariff-reduction strategies are examined. Under the first strategy, which is similar to that adopted in Australia in 1973, the tariff cut is implemented without warning. The second strategy is consistent with the current approach of phasing in tariff cuts according to a previously announced schedule. Under the third strategy the tariff cut is implemented several years after it is announced. We find that the long-run effects of the alternative tariff reduction strategies are similar, but that the adjustment paths are not. Our results suggest that if tariffs are to be reduced then it is preferable to implement the policy without warning. The results emphasise the point that the sooner tariffs are reduced the sooner will the allocative efficiency gains from doing so be realised.

Suggested Citation

  • Michael Malakellis, 1997. "Should Tariff Reductions be Announced? An Intertemporal Computable General Equilibrium Analysis," Centre of Policy Studies/IMPACT Centre Working Papers op-88, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:op-88
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    References listed on IDEAS

    as
    1. Powell, Alan A. & Snape, Richard H., 1993. "The contribution of applied general equilibrium analysis to policy reform in Australia," Journal of Policy Modeling, Elsevier, vol. 15(4), pages 393-414, August.
    2. R. G. Gregory, 1976. "The Green Paper on Policies for Manufacturing Industry: A Review," Australian Journal of Management, Australian School of Business, vol. 1(2), pages 51-78, October.
    3. Lluch, Constantino, 1973. "The extended linear expenditure system," European Economic Review, Elsevier, vol. 4(1), pages 21-32, April.
    4. Robert E. Lucas & Jr., 1967. "Adjustment Costs and the Theory of Supply," Journal of Political Economy, University of Chicago Press, vol. 75(4), pages 321-321.
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    More about this item

    Keywords

    industry protection; tariffs; allocative efficiency; com- parative-dynamic simulation; computable general equilibrium model; labour market adjustment; timing issues;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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