Trade and Tax Reforms in a Cash-in-Advance Economy
Abstract
Type
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peer reviewed
Educational material type
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Journal name
Southern Economic Journal
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Description
We examine the effects of both tariff-only and coordinated trade-tax reforms on market access, government revenue, and welfare for a small monetary economy, under the assumption that a certain fraction of purchases of each good must be financed with cash held in advance. We show that if the cash requirement ratio in the exportable sector is greater than that in the importable, then, contrary to previous results, (i) a uniform radial reduction of tariffs has ambiguous effects on both welfare and market access, (ii) tariff and consumption tax reforms that leave consumer prices unchanged may be more efficient in improving market access and welfare than a reform that involves only tariffs, and (iii) export and production tax reforms that keep producer prices unchanged may be welfare deteriorating.
Description
Keywords
monetary economy, market access, tariff structure, welfare, policy, quotas, money
Subject classification
Citation
Link
<Go to ISI>://000290828100012
Language
en
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Πανεπιστήμιο Ιωαννίνων. Σχολή Οικονομικών και Κοινωνικών Επιστημών. Τμήμα Οικονομικών Επιστημών