Pareto-improving tariff-tax reforms under imperfect competition

Kenji Fujiwara ()

No 110, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: Constructing a duopoly model with non-constant marginal costs and a strict Pareto criterion, this paper examines welfare effects of world-price-fixing tariff reductions accompanied by adjustments of a domestic tax. If a destination-based consumption tax is used, this reform achieves a strict Pareto improvement under sufficiently decreasing marginal costs. If, in contrast, an origin-based production tax is employed, a strict Pareto improvement holds whether marginal cost is decreasing or not. Thus, we can conclude that tariff-tax reforms that improve the world welfare and are irrelevant of tax bases are possible if the targeted industry exhibits sufficiently decreasing marginal costs.

Keywords: tariff-tax reform; destination principle; origin principle; strict Pareto improvement/deterioration; duopoly (search for similar items in EconPapers)
JEL-codes: F12 F13 H2 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2013-10, Revised 2013-10
New Economics Papers: this item is included in nep-pbe and nep-pub
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http://192.218.163.163/RePEc/pdf/kgdp110.pdf First version, 2013 (application/pdf)

Related works:
Journal Article: Pareto-improving tariff-tax reforms under imperfect competition (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:110

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