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Trade Taxes Are Expensive

Author

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  • Can Erbil

    (Brandeis University & EcoMod)

Abstract

This paper examines the welfare implications of trade reforms in the presence of a government budget constraint. There is consensus about gains from opening up to trade. The less investigated question is, whether a coordinated tax reform, where the tariff revenue cuts are compensated with increases in distortionary domestic taxes, will still be welfare improving or not. Are trade taxes an expensive tool to raise the necessary revenue for governments? This paper uses a CGE model to generate “Marginal Cost of Funds” (MCF) figures for 32 countries to answer this question. The results suggest that there are significant welfare gains from further trade liberalization, especially for developing countries.

Suggested Citation

  • Can Erbil, 2004. "Trade Taxes Are Expensive," International Trade 0409002, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpit:0409002
    Note: Type of Document - pdf; pages: 30. Appendix is not for publication
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/it/papers/0409/0409002.pdf
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    References listed on IDEAS

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    Cited by:

    1. Peter Neary & James E. Anderson, 2013. "Revenue Tariff Reform," Economics Series Working Papers 688, University of Oxford, Department of Economics.
    2. Mickael Beaud & Thierry Blayac & Patrice Bougette & Soufiane Khoudmi & Philippe Mahenc & Stéphane Mussard, 2013. "Estimation du coût d'opportunité des fonds publics pour l'économie française," Studies and Syntheses 14-01, LAMETA, Universtiy of Montpellier, revised Oct 2014.
    3. Anderson, James E. & Neary, J. Peter, 2016. "Sufficient statistics for tariff reform when revenue matters," Journal of International Economics, Elsevier, vol. 98(C), pages 150-159.

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    More about this item

    Keywords

    Trade Liberalization; Tax Reform; Welfare Gain; Marginal Cost of Funds (MCF); Computable General Equilibrium Model (CGE);
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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